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Anonymous

Hey I am on Medial • 6m

Venture Capital (VC) term sheets often include clauses that can have significant implications for founders and the future of their startups. Below are some critical clauses that founders should carefully evaluate: 1. Valuation and Equity Pre-Money

Anonymous

Hey I am on Medial • 6m

6. Voting Rights and Protective Provisions Be cautious of clauses requiring investor consent for major decisions (e.g., issuing new shares, raising debt, or approving budgets). Excessive protective provisions can limit operational flexibility. 7. Drag-Along and Tag-Along Rights Drag-Along: Investors forcing founders to sell their shares during an acquisition can affect your exit plans. Tag-Along: Protects minority shareholders (often positive but still worth reviewing). 8. Exit Clauses Investors might impose mandatory exit timelines (e.g., requiring an IPO within 5-7 years). This could pressure the business into premature decisions. 9. Pro Rata Rights Investors may request the right to maintain their ownership in future funding rounds. Be prepared for this during growth stages. 10. Dividend Preferences Watch for cumulative dividends, which can add a growing liability to preferred shares over time.

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Tag Along v/s Drag Along Rights When drafting agreements, Tag Along and Drag Along Rights are essential clauses that shape how investors and founders navigate ownership changes. Let's break down the impact from both perspectives: For Investors: 1.

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Rajan Paswan

Honorary Mentions - ... • 1y

We've covered dilation and the Board of Directors(BOD). Now, let's delve into Tag-Along Rights—An Essential Topic Imagine your startup takes off! A major player wants to buy the company, and your majority shareholder is ready to cash in. But what ab

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Rajan Paswan

Honorary Mentions - ... • 1y

As a founder, your startup is your baby. But what about when that Golden Exit opportunity appears? Drag-Along Rights in your Shareholder Agreement(SHA) are crucial for ensuring a smooth acquisition process. What are Drag-Along Rights? They empower

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Saksham
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A Term Sheet for company Pre-Seed/Seed/A/B defines: 1) Company 2) Founders 3) Investors 4) Structure of financing 5) Liquidation preference 6) Anti-Dilution 7) Advisory board 8) Material Decisions 9) Pro-rata Right 10) Right to First Refusal 11) Dra

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Demystifying the Ownership Structure Clause in Shareholder Agreements (SHA)📍 The Ownership Structure clause in your SHA is crucial. Here's why: 1. Defines Equity Distribution: It outlines who owns what percentage of the company. This impacts deci