Deal Terms
Trigger
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Quick Answer
An event that activates a contractual provision — such as anti-dilution adjustments triggered by a down round, or acceleration triggered by an acquisition.
In venture capital documents, a trigger is an event that activates a contractual right or provision. Common triggers: anti-dilution triggers (a financing at a lower price per share triggers anti-dilution adjustments), acceleration triggers (acquisition triggers vesting acceleration — single-trigger means acquisition alone, double-trigger means acquisition plus termination), conversion triggers (automatic conversion of preferred stock to common at IPO), and clawback triggers (fund underperformance triggers GP obligation to return carry). Understanding what triggers exist in a company's charter and investor agreements is critical for founders evaluating transactions — certain deal structures can unexpectedly trigger provisions that change the economics significantly.
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Frequently Asked Questions
What is Trigger in venture capital?
In venture capital documents, a trigger is an event that activates a contractual right or provision. Common triggers: anti-dilution triggers (a financing at a lower price per share triggers anti-dilution adjustments), acceleration triggers (acquisition triggers vesting acceleration — single-trigger...
Why is Trigger important for startups?
Understanding Trigger is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
What category does Trigger fall under in VC?
Trigger falls under the deal-terms category in venture capital. This area covers concepts related to the financial and legal terms that define investment agreements.
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