What clauses should you include in your investor agreement for optimal governance and alignment?

2 Alignment clauses

Alignment clauses aim to align the interests and incentives of the founders and the investors. They may include provisions on the vesting schedule, anti-dilution protection, drag-along and tag-along rights, pre-emption rights, and liquidation preference. Alignment clauses are important to ensure that the founders are committed to the long-term success of the business, but also to protect the investors from losing their share or value in the event of a sale or liquidation.

3 Dispute resolution clauses

Dispute resolution clauses define how any conflicts or disagreements between the founders and the investors will be handled. They may include provisions on the mediation, arbitration, or litigation process, the choice of law, and the jurisdiction. Dispute resolution clauses are important to avoid costly and time-consuming legal battles, and to preserve the relationship and reputation of both parties.

4 Confidentiality clauses

Confidentiality clauses oblige the founders and the investors to keep the information and data related to the business and the investment confidential. They may include provisions on the scope, duration, and exceptions of the confidentiality obligation, as well as the remedies and penalties for breach. Confidentiality clauses are important to protect the intellectual property, trade secrets, and competitive advantage of the business, as well as the privacy and reputation of both parties.

5 Termination clauses

Termination clauses specify the conditions and consequences of ending the investor agreement. They may include provisions on the events of default, the notice period, the termination rights, and the post-termination obligations. Termination clauses are important to clarify the expectations and obligations of both parties in case of a breach, a change of circumstances, or a mutual agreement to part ways.

6 Miscellaneous clauses

Miscellaneous clauses cover any other matters that are not addressed by the main clauses of the investor agreement. They may include provisions on the assignment, amendment, waiver, severability, and entire agreement of the contract. Miscellaneous clauses are important to ensure that the investor agreement is comprehensive, consistent, and enforceable.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?