My answer to What are the most common Startup Investment Contract clauses?
Answer by Raad Ahmed:
There can be quite a few contract clauses in regards to investment startups. Sometimes investors insist on certain clauses while other times the business may only feel comfortable moving forward with certain points outlined. No matter the case, there are a few typical clauses you’ll want to keep in mind.
- Terms of investment—Put simply, this is the part where it’s outline how much the investor will give, when the investment will be transferred and the kind of investment it is.
- Return of investment—This is where you outline when the investor should expect their return or when they can realistically ask for the return. Include information about interest or flat-rates.
- Role of investor—You should include some language about the role of the investor, their ability to make decisions, or even take on a managerial role.
- Basic terms—This may seem to be a given, but don’t forget to include basic information like the full names of the parties, addresses, date of the investment, etc. This information could really matter later on in the event of litigation.
Of course, the devil is in the details so each point here is only a basic outline. Within each step you will need to be thorough so that the agreement is crystal clear and protects all parties.
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