How Do Venture Capitalists Structure Their Investments?
VCs typically invest in exchange for equity in the company. The terms of these investments are often outlined in a term sheet, which includes details such as the valuation of the company, the amount of capital being invested, and the rights and obligations of both parties. Common structures include preferred stock, which gives VCs certain advantages over common stockholders, such as priority in receiving payouts in the event of a liquidity event.