Written by Avvo Staff, almost 4 years ago.
Venture capital is a high-risk investment that involves loaning money to new companies in exchange for shares in the company and the right to have some input in the business strategies. Generally,... more
Written by attorney Eric Koester, over 3 years ago. STAFF PICK
What are Anti-Dilution Provisions?. Dilution prevention provisions are designed to protect the investor from dilution that may occur in subsequent financings where stock is sold at a price lower... more
Written by attorney Eric Koester, over 3 years ago. STAFF PICK
Be Pragmatic. Negotiating a term sheet with a venture capital firm may seem like a challenge. And, there will be some challenging aspects to the negotiations. However, remember that the venture... more
Written by attorney Eric Koester, over 3 years ago.
What is Valuation?. Valuation refers to the value of the Company as established by agreement between the Company and the investors. Investors typically refer to “pre-money valuation” and “post-... more
Written by attorney Eric Koester, over 3 years ago.
Why would a term sheet include dividends?. A typical term sheet will include a non-cumulative dividend on the preferred stock — usually set at between 8 and 10% of the purchase price per annum.... more
Written by attorney Eric Koester, over 3 years ago.
What are Redemption Rights?. The term sheet may include a provision to require the Company to redeem (“buy back at the original purchase price plus an annual carrying cost”) the preferred stock.... more
Written by attorney Eric Koester, over 3 years ago.
What are Drag-Along Rights?. The primary purpose of drag-along rights are to ensure that the investor’s shares won’t be held hostage in the event of a favorable acquisition or merger event.... more
Written by attorney Eric Koester, over 3 years ago.
What are Registration Rights?. Registration rights are an important right to investors since they provide a contractual right for investors to demand that the company register their shares with the... more
Written by attorney Eric Koester, over 3 years ago.
What are Co-Sale Rights?. In order to prevent a situation where, following an investment, the founders jump ship and sell their shares to a third party investor, most venture financings will include... more
Written by attorney Eric Koester, over 3 years ago.
What are Voting Rights?. Venture preferred stock typically has voting rights, computed based on the number of shares of common stock into which the preferred stock can be converted. In addition,... more
