3. Participation Rights

The previous chapter has shown how anti-dilution provisions protect investors against the adverse effects of dilution if the firm develops not as well as expected and is forced to raise capital in a down round. 

In this section, we discuss common deal elements that investors use to make sure that they can participate in attractive stock transactions as well as future rounds of financing. In this regard, the key deal terms are:

  • Right of First Refusal 
  • Tag-Along Rights (Co-Sale Rights)
  • Preemptive Rights.