Sample_Blog_Banner.jpg

RSS header - this is hidden

What are Information Rights?

Posted by Erica Duignan Minnihan on May 13, 2016 4:30:00 PM

Fotolia_93590796_Subscription_Monthly_M.jpg

Information rights establish just how often the company has to communicate with investors, and what type of information they must provide. Fundraising can be a lot of work for founders, but so can dealing with information requests from investors after the raise. Ideally, most founders would prefer to focus on growing their businesses than providing you with updates. However, investors can often feel they have been left in the dark post-investment if they have not been granted a seat on the board.

Information rights provide a guideline for how often a founder needs to communicate with investors, and the extent of information that must be provided at the agreed upon intervals. It’s a protection for the investor to ensure they are kept “in the loop” as the company grows, and also a protection for the founder to keep investors from contacting them excessively for updates.

So make sure that you review the term sheet before investing, so that you understand exactly how much information on the company’s progress you are legally entitled to receive, and at what intervals of time. This will help ensure that you and the founder are on the same page, and can maintain a productive and mutually beneficial relationship.

If the investment documentation does not include information rights, speak to the Founder about adding them. They are an important protective provision that will allow you to better manage your investments.

Topics: Venture Investing, Venture Investing Academy, Information Rights