In this content created in collaboration with Novus Concilium, we offer an introduction to Venture Capital from an investment perspective. In other words, you’ll get a deep dive into the ecosystem from a fundraising perspective.
We’ll talk about everything from crowdfunding and convertible instruments to the different types of investment clauses every founder should know when seeking funding from Venture Capital funds.
Cap Table
Cap table is a shorter way of saying Capitalization Table, and the term comes from English, where it refers to a company’s share capital. The simplest way to represent a cap table might be an Excel file listing the names of the shareholders, the number of shares, and the name of each share class.
When raising capital, the percentage of the company held by an investor, founder, or employee will become increasingly smaller. In addition, founders typically grant investors preferred shares.
Types of clauses
There are 2 types of clauses to define when negotiating an investment with an investor. These clauses are economic and corporate, and are usually negotiated first through a term sheet.
Economic clauses
Clauses that establish economic rights for investors. Some of the clauses that may be negotiated include:
- Price per share (valuation)
- Preference
- Conversion rights
- Anti-dilution
Corporate clauses
Clauses that determine control of the company—in other words, how it is managed. Some of these clauses are:
- Board
- Veto rights
- Reporting/monitoring
- Drag-along rights
- Most Favored Nation (Most Favoured Nation)