Start-Ups: A Critical Issue In Investor Rights Agreements

One important issue that you should pay a particularly close attention to when entering into an investor rights agreement with the people who are looking to invest into your start-up is the section in that agreement that talks about the degree of involvement that investors will have the right to in the day to day operations of your company. Ideally, you want your investors to have as little control as possible over your operations, and to have their rights limited to reasonable access to your company’s financials. For instance you can agree that you will deliver your profit and loss statements, balance sheets and other common financial documents to the investors every fiscal quarter. You should pay attention to any language in the agreement that in so many words suggests that your investors have the right to walk into your office and tell you how to do your job, who to hire, how to develop and market your product, how to design your website, etc. After all, no CEO enjoys…

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