Investment agreements

Raising money from an investor feels like the end of a long search, and the term sheet usually arrives with the assurance that it is standard. The agreements that follow decide far more than the price per share. They settle who can block a decision, how the proceeds are shared if the company is sold, and what the founders must still deliver. Clauses that seemed remote at signing tend to matter most in the next round, or at the sale.

An investment agreement is negotiated once and lived with for years, alongside the articles and any shareholders’ agreement. It touches the money, the control and the people who built the company:

• the rules on term sheets, and on which of their provisions bind the parties before the final agreement is signed;
• the rules on the conditions to be met before the investor pays in, and on payment in tranches tied to milestones;
• the rules on protecting the investor against dilution if a later round is priced lower;
• the rules on liquidation preferences, and on who is paid first when the company is sold or wound up;
• the rules on the decisions that need the investor’s consent before the company may take them;
• the rules on founder vesting, under which founders earn their shares over time;
• the rules on setting aside shares or options for employees, and on who bears the cost of that pool;
• the rules on the information the investor receives after closing, and on how it may use it.

Our lawyers can support you with this.