Emerging Enterprise Center Blog - Fair and Not Fair in Deal Terms - Comments http://www.emergingenterprisecenterblog.com/ Boston Startup Lawyers & Attorneys for Venture Capital & Financing Entrepreneurs en Copyright 2012 Fri, 30 Mar 2012 11:32:42 -0500 Fri, 30 Mar 2012 11:32:42 -0500 http://www.sixapart.com/movabletype/?v=4.32-en http://blogs.law.harvard.edu/tech/rss Mike Feinstein Dave,
Two comments on this. One past deal of mine really needed founder representations. The founder worked at a company that would be a potential competitor of the new company. And, he had developed IP for that company. We needed his representation that the IP he was bringing to the new venture was his and not tied up by his old company. And, it turned out that he was wrong about that, which gave the investors a lot of leverage when it happened.

Secondly, I think that you are right about antidilution for early stage deals. With a series A deal, what's the point? The price is based on the investors getting whatever percentage of the company that is agreed upon. It's not based on a real valuation. However, for later stage, higher priced deals, I think that it does have some use. In this case, the company could be benefitting from overall market euphoria. The new investor may not want to take all the risk of the bubble bursting before they can exit. If they propose a realistic valuation, they have no chance of getting the deal. Instead, antidilution is a recognition that there is market risk to the price on the deal. It's not often thought of that way, but that's how it works out.

]]> http://www.emergingenterprisecenterblog.com/deal-terms/fair-and-not-fair-in-deal-terms/#18791 http://www.emergingenterprisecenterblog.com/deal-terms/fair-and-not-fair-in-deal-terms/#18791 Deal TermsNVCA Mon, 15 Feb 2010 20:10:14 -0500 Dave Broadwin