What Is an Example of a Covenant in a VC

question 21

Multiple Choice

What is an example of a covenant in a VC investment deal?

• A) Preferred equity that also serves as debt instrument with an interest rate.
• B) Board seat(s) for the investors.
• C) Anti-dilution clauses so that the VC can preserve its current percentage ownership position, regardless of future investors.
• D) Placing founders' equity back as stock options which vest over time, or do not vest should the founders be asked to leave the company by the Board.
• E) All of the above.

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Definitions:

Random Assignment

A method used in experiments to place participants into separate groups using randomization, which helps ensure that each group is similar at the start of the experiment.

Laboratory Experiment

A research method in which variables can be controlled and manipulated in a highly regulated environment to observe the effects on other variables.

Psychological Experiment

An investigation in which a researcher manipulates one or more variables to observe the effect on some behavior or mental process.

Negative Correlation

A relationship between two variables in which one variable increases as the other decreases, indicating an inverse association.