Deal Terms
What are information rights in VC?
Quick Answer
Information rights entitle investors (typically those above a minimum investment threshold) to receive regular financial reports, board meeting materials, and annual audited statements from portfolio companies.
Detailed Answer
Information rights are standard VC terms that ensure investors receive regular updates on company performance. They're typically granted to "major investors" — those investing above a defined threshold.
Standard information rights include:
**Quarterly reports:** - Income statement, balance sheet, cash flow - Key metrics dashboard (ARR, burn rate, runway) - Business update and pipeline status
**Annual reports:** - Audited financial statements - Annual operating plan and budget - Cap table update
**Board materials:** - Board meeting packages (if investor has a board seat or observer seat) - Monthly or quarterly board decks
**Ad hoc rights:** - Inspection rights (access to books and records) - Consultation rights on major decisions
Typical threshold: Major investor status is usually $250K-$1M minimum investment, though this varies by round size.
Founder considerations: - Information rights create reporting obligations — budget time and resources for this - More investors with info rights = more reporting burden - Consider limiting to major investors only to reduce overhead - Some founders share more than required to build trust and transparency
Related Questions
What is a SAFE (Simple Agreement for Future Equity)?
A SAFE is an investment contract created by Y Combinator where an investor provides capital to a startup in exchange for the right to receive equity in a future priced round, with terms like a valuation cap and/or discount rate.
What is a term sheet?
A term sheet is a non-binding document that outlines the key terms and conditions of a proposed investment, including valuation, investment amount, board seats, liquidation preferences, and protective provisions.
What is a liquidation preference?
A liquidation preference gives preferred shareholders (investors) the right to receive their investment back before common shareholders in an exit. The standard is 1x non-participating, meaning investors get back their investment amount or convert to common stock — whichever is higher.
What is a convertible note?
A convertible note is a short-term debt instrument that converts into equity at the next priced round, typically with a valuation cap, discount rate, interest rate (2-8%), and maturity date (12-24 months).