Article · 10 min read

Founder Cheatsheet: Information, Inspection and Observer Rights in a Venture Financing

Becky Mancero · Built In Free Beginner

A lawyer-written plain-English breakdown of the three rights an investor bundles into one ask, so you can unbundle them at the table. It spells out that seed financials are unaudited (do not let anyone force audited statements on a seed budget) and that observer rights normally sit behind a 25 to 50 percent ownership threshold, which is your ammunition for capping who gets what by cheque size.

  • Information rights and inspection rights are cheap and standard; observer seats are the ask to push back on, and are usually gated to a 25 to 50 percent stake
  • Seed-stage financials should be unaudited: audited statements are a waste of scarce cash, so refuse that requirement
  • Threshold-gating rights (a minimum cheque before info or observer rights kick in) is normal practice, so cap your angels out of a monthly call
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The question it answers

  1. An investor keeps asking for information rights and a board seat in the term sheet. What should I actually give a seed investor?

Read with it

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