Section outline

  • Last but not least are the exit provisions. As we have seen at the beginning of this module, a clear path to exit is one of the most crucial deal elements for investors. With the appropriate exit provisions in the term sheet, investors make sure that there are no (legal) obstacles on this path. These provisions generally include:

    • Redemption rights
    • Registration rights
    • Participation rights

    The purpose of this module is to show how these provisions work and what implications they have for the investors and the entrepreneurs. Ultimately, we will see that investors can, in principle, use these rights to force a liquidity event upon the company. This is important for entrepreneurs to remember before signing a term sheet, as  entrepreneurs might have different long-term plans with "their" company.

    • This section's reading assignment and review questions are listed below: