Raising Venture Capital

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caution While most protective provisions are not negotiable, many founders do not realize the control dynamics these provisions create. In most significant priced rounds following the seed, the company will have to agree to protective provisions. Too often, founders inaccurately believe ownership percentage is the ultimate driver of control dynamics. But protective provisions, while they shouldn’t be considered backdoor mechanisms for investors to sneakily exert control, can absolutely compel you to compromise on big decisions for your company. It is critical for you to know what decisions you will have to consult your investors on after agreeing to protective provisions.

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