For the past few months, I’ve been exploring some of the more confusing terminology in VC term sheets. In my last post, I discussed conversion provisions, which address the right (or obligation) of the investors to convert their shares of preferred stock into shares of common stock. Today, I examine redemption rights of the investors.
What are redemption rights? A redemption right is another feature of preferred stock. It lets investors require the company to repurchase their shares after a specified period of time. In essence, it’s a “put” right – that is, the investors may elect to put their shares back to the company. As a practical matter, however, redemption rights are rarely exercised and, according to Fenwick & West’s recent VC survey, only 20 percent of the Bay area deals during the first quarter of included such rights.
To read the full, original article click on this link: Demystifying the VC term sheet: Redemption rights | VentureBeat
Author:Scott Edward Walker
