Information Rights

Definition An information rights provision in a term sheet outlines the information a company must deliver to investors beyond what state law requires.* Generally, this includes a commitment to deliver regular financial statements and a budget to investors. A term sheet’s information rights typically terminates in the event of an IPO and often gives investors access to the company’s facilities and personnel.*

While the default reporting period is quarterly, investors may ask for financial statements on a monthly basis early in a company’s life. Many companies elect to provide monthly financials to major investors for a long time.

Founders have a wide range of opinions about transparency. Some founders won’t mind sending every investor their financial statements monthly, and others will be less comfortable sharing information with too many people. Sending your financial statements to each different investor when they request it can become burdensome, and founders should consider how comfortable they are with their financial statements being in the hands of a large number of investors. If you do grant information rights to investors below your major investor threshold, make sure you aren’t committing to providing two different sets of documents on two different schedules to different investors after you raise a further round of funding.

When offering any information rights at the seed stage, make it clear to each group that they will have the same information rights and schedules as your Series A investors. Keep in mind that there may be a major investor threshold in a subsequent round that is higher than a previous investor’s ownership percentage, and you’ll likely need to continue to agree to information rights for those who have held them before.

important Note that information rights may be reserved for major investors.

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