An Investor Rights Agreement (IRA) is a typical document negotiated between a venture capital (VC) and other companies that provide capital to a start-up. Read 3 min Anti-dilution clauses are typically linked to raising capital or when more shares are issued. Dilution is simply a reduction in a holding which can be either a dilution of value (economic dilution) or a relative participation (dilution in percentage). Dilution protection provisions give an investor the right to maintain pro-rated ownership of an enterprise by allowing the investor to purchase a proportionate number of shares in a future issue of shares of the enterprise at specified or adjusted prices. All companies have financing requirements, and sometimes working capital and cash flow are insufficient to meet their needs or growth needs. An SHA should define the methods of seeking additional capital and the priority to be given to this type of funding. This additional financing is often obtained through external financing, including mezzanine financing (convertible bonds, sometimes with a sweetener such as warrants), by outside investors and traditional loans from banks or other financial institutions; shareholder loans; and cash calls. It is also necessary to define the order in which such additional funding is requested. An investment agreement and a shareholders` agreement are two often confused legal documents, often used by large and small companies. The distinction between the two allows you to seamlessly integrate the fundraising efforts of new shareholders and consolidate your company`s ownership rights. Shareholders, buyers and additional membership instruments The Term Sheet should not be a complex document and, if it is not to be legally binding, it offers an out to both investors and founders if they no longer want to continue the relationship.

In startups, it is very common for investors to commit to investing capital on different miles of the company. Tranches are typically related to product development, revenue targets, or other operational ratios. During the implementation of an investment agreement, you can choose to use a proposal for an investment agreement for preferred shares to integrate multiple completion tranches and thus leave room for higher investment income over the course of the business. .