Growth Equity Round
A software company, its first institutional investor and a term sheet with control provisions attached.
Read the Summary
Overview
A software company with steady revenue received a growth equity offer from its first institutional investor. The term sheet included board seats, protective provisions and a broad liquidation preference. The founders wanted the capital without giving up day-to-day control.
Diligence also revealed that early code had been written by contractors without signed assignments, which the investor flagged as a condition to closing. Several of those contractors had long since moved on.
Results
We negotiated board composition and narrowed the protective provisions to major decisions only, leaving hiring and budgets with management. Before closing, we collected confirmatory IP assignments from every past contractor.
Founder vesting and a clear option pool rounded out a capitalization table the investor could rely on. The founders reviewed every change against their own long-term plans. Closing followed within a month.
Legal Outcome
The round closed with founders holding a majority of the board and the company owning all of its code outright.
- Protective provisions narrowed to sales, new equity and major debt only
- Confirmatory IP assignments collected from every past contractor before closing
- Clean capitalization table with founder vesting and a sized option pool
Conclusion
Investment terms last long after the money arrives. The founders kept the control they needed to run the company and a clear view of which decisions now require investor approval.
The IP cleanup also prepared the company for any future sale or financing, removing a question that tends to surface at the worst possible moment.
Illustrative matters for a fictional firm. Figures show deal or license value, not fees or court awards. Past results do not predict future outcomes.
Book a 30-minute consult
Facing something similar? A short call is the fastest way to see where you stand.
