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:

Standard Costs

Predetermined costs for materials, labor, and overhead used as a benchmark to measure actual performance against.

Direct Labor-Hours

The total hours of labor directly involved in the production of goods or services.

Direct Materials Variances

The difference between the actual costs of direct materials used in production and the standard or expected costs.

Fixed Overhead

Expenses that remain constant regardless of how much is produced or sold, including items like lease payments, wages, and insurance premiums.