Venture Financing:

Structuring the Deal

Preferred Stock

Typical Terms of Preferred Stock Issued to Venture Capitalists

 

  • Types of security and number of shares issued, price per share

  • Conversion price: number of common shares per preferred share

  • Additional formulas

  • Registration rights: demand rights; "piggyback"; registration expenses; transfer of rights

  • Use of proceeds

  • Right of first offer to purchase of new securities

  • Stock restriction agreements

  • Reserved shares

  • Non-competition agreement

  • Veto rights: next financings, acquisitions, mergers

  • Veto rights:

- Sale and other disposition of assets

- Dividends

- Amount of stock issued

- Borrowing and leasing

- Compensation of executive employee staff

- Ownership, sale or access of technology

  • Rights of inspection

  • Right to elect board members, attend board meetings

  • Vesting rights of employees

  • Receipt of financial statements

  • Closing expenses

How To Structure Your Deal

Ways of Realization of Financial Returns for Investors

Equity Investor's Compensation

Private Placements

Private Placement of Convertible Stock: Sample Term Sheet

Terms and Conditions for Securities Offerings

 

Venture Financing

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