Notes on Venture Deals 3

Board of Directors

Be wary of observers brought by VC

Early stage board example: Founders _________1st VC CEO /_________\2nd VC Observer

Protective Provisions

Investors’ right to say NO.

Unless VCs agrees:

  1. DO NOT change their stock terms (f)
  2. DO NOT make more stock (f)
  3. DO NOT make senior stock than VC’s (f)
  4. DO NOT buy back common stock (VC’d generally agree)
  5. DO NOT sell the company (Critical as long as VC has enough share to be relevant)
  6. DO NOT change the corporation type (f)
  7. DO NOT change the size of BoD (f)
  8. DO NOT pay or declare a dividend

Regardless of the investor, fight to have them vote equally (as a singe class), i.e have the price equal. Remember this negotiation is on behalf of the company at the current as well as in the future

Drag-Along Agreement

Try to get the drag-along rights to pertain to following the majority of the common stock, not the preferred.

Conversion

Be careful of “This is nonnegotiable”, or “This is how we always do deals,” or “this is a standard deal term for us”.

blog comments powered by Disqus

Published

13 October 2015

Categories