1. Introduction

The last important issues that investors want to take care of when designing term sheets is to make sure that there is a clear path to exit. The reason for this is very simple: The investment horizon of professional investors is limited and they want to make sure that they can move on to other opportunities once the company has ripened.

To this end, investors generally ask for three types of rights in the term sheet:

  • Redemption Rights: Make sure that investors can sell their shares back to the company
  • Registration Rights: Make sure that the firm can go public if it proves to be an IPO candidate
  • Participation Rights: Make sure that investor participate in attractive stock transactions. 

 

In what follows, we briefly discuss some important aspects of these rights.