Investors who only have a minority stake in a narrow company want this form of agreement to be made to protect their interests. Companies grant these rights because they get a capital investment that might not otherwise happen, and they want to keep the deal as attractive as possible to investors. In order to “retain” the investment, binding subscription agreements defining the essential conditions of the investment are established. Investors (with the exception of the lead investor) sign a simple subscription letter confirming the amount of the investment per investor, the number and class of shares issued in return for the investment and the expected date on which the cycle will be closed. Each venture capital transaction begins with the term sheet. A liquidation preference is a right for the investor to receive the proceeds of a “liquidity event” that takes precedence over other classes of shareholders. This means that an investor receives a payment in front of one of the founders or holders of common shares as a result of such a “liquidity event”. . .

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