Why Do Investors Want Protective Provisions?

Protective provisions let preferred shareholders veto certain actions, such as selling the company or raising capital. They protect the preferred, who are minority shareholders, from unfair actions by the common majority. However, the preferred shouldn’t use protective provisions to serve their other interests.

 

(Full Post: http://venturehacks.com/articles/understand-protective-provisions)


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Babak Nivi

Babak Nivi is a co-founder of AngelList and Venture Hacks. Previously, he was an entrepreneur-in-residence at Bessemer Venture Partners and Atlas Venture. He has worked on startups including Songbird, Grockit, and Kovio. He went to school at MIT where received 2 patents and published in Science.

 

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Filed Under:
Collection: Funding
Category: Term Sheet Terms