Side Letters

Definition A side letter is a separate contract used in a negotiation to give investors separate terms for an arrangement than those outlined in the primary contract documentation. For example, in the case of a minor investor that wouldn’t normally get information rights, the company can draft a side letter granting that investor those rights.

Side letters are often a fancy way of saying, “Hey, give me rights that no one else gets,” and founders should be wary of giving one investor special rights. On the other hand, some investors, like the venture arms of large corporations, have special reporting requirements that other investors may not require—side letters can be a great tool in a situation like this.

If you found this post worthwhile, please share!
Read six complete sections of this book for free.
Get six free sections of this book in your inbox over the next two weeks.