Investor report

The next issue for founders and the investor to discuss is reporting. You need to agree right away on what kind of reporting the investor expects from the startup and how often: once a month, a quarter, a year, or some other way. And how detailed the investor expects the reporting to be. Because it happens that one side thinks they will briefly describe what is going on in the project in a single sentence, while the investor expects a detailed report several pages long. It is important that both sides have the same understanding. The next question: what happens if the startup's reports make it clear that the project is not going according to the plan that was once presented to the investor?

What measures can the investor take in that case? This needs to be discussed. You need to explain to the investor that if they are not on the board of directors and have no voting rights, they cannot influence the startup's further development. And the investor will most likely have to accept that they won't be able to do anything; all that is left for them is to watch where the startup is heading, no longer in line with the original plan but in some other way. In case of failure, all they can do is recognize this investment as unsuccessful, and if the startup reaches success by a different path, simply be glad for that startup.

The next point for startups and the investor to discuss is the investor's status in the startup's future rounds. A certain practice has already taken shape on this in Silicon Valley, USA, and it is basically followed around the world as well. And one of the key concepts here is pro rata, that is, the first investor's right to participate in subsequent investment rounds so that their share in the company is not diluted.