Four Term Sheet Provisions That Protect VC Interests

Four Term Sheet Provisions That Protect VC Interests by Robin Riddell, Alyssa Riddle and George Gaprindashvili, PitchBook

Venture investing is risky. That’s why VCs are experts at building downside protections into their deals to limit their chances of losing money if an investment declines in value. It’s important to understand these protections, how they are structured and what they mean. Below, we break down four term sheet provisions that VCs utilize, providing examples, as well as specific deal data from the PitchBook Platform.

Voting Rights

Preferred stock oftentimes comes with Board seats and voting rights. With this, venture investors have more influence on the company’s operations, management and direction.

Dividends

Dividends are one of the rights that make preferred stock “preferred” rather than...