VC Term Sheets: Why We're so Pro on Anti-Dilution.
This article was originally published in Start Up
A VC's perspective on anti-dilution, an often convenient, and sometimes investment saving deal provision.
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Financing provisions that appear to only directly affect the various series of preferred stock can in fact impact the company's operations somewhere down the line. Such is the case with pay-to-play, voting rights, and a right of first refusal among investors.
Arthur Klausner discusses liquidation and participating preferred stock in the third part of his series on VC term sheets.
When deal discussions get tough and there seems to be no way to cross the chasm between the entrepreneur's valuation expectations and the VC's choking point, the savvy professional investor will likely find a way to slant the secondary terms in order to achieve a deal that works.