Information Rights

A contractual right for an investor to receive a private company's financial statements and other operating updates on a regular basis.

Example

An investor with information rights receives quarterly financial statements and an annual budget, while an investor without them may receive nothing beyond occasional founder updates.

Important

Smaller cheques on a SAFE frequently carry no information rights at all, leaving the investor dependent entirely on what the founders choose to share.

Related terms

• Due diligence — The work of independently verifying the claims made about an investment before committing money to it - the documents, the counterparties, the registrations and the numbers.
• Cap Table — The running ledger of who owns what percentage of a company, on what instrument and what terms, before and after each financing event.

Lessons that explain it

• A board seat, an observer seat and information rights are three very different things — Board directors vote and carry legal duties. Observers attend without voting. Information rights give access to figures without any role in decisions. Knowing which you hold defines what you can do and what you owe. (9 min)
• Convertibles trade speed and low cost for an unsettled price — SAFEs and notes close quickly and cheaply but defer the valuation and the governance. Priced rounds cost more and take longer, and they settle ownership, rights and price now. (11 min)
• Ask for a few numbers on a steady rhythm, not everything whenever you remember — Good monitoring of private positions rests on a consistent update, at a cadence matched to stage and position size, covering the handful of numbers that actually signal health. (10 min)
• Ordinary dilution can halve your stake before anyone does anything wrong — Six checks on one specific deal: the terms, the cap table ahead of you, what your stake becomes after several more rounds of nothing going wrong, the preference stack, the traction evidence, and whether you have reserved capital to defend the position at all. (14 min)
• You will not set the price, but you can ask for the three things that matter — Small investors join rounds on terms the lead negotiated. What remains negotiable is usually information rights, pro-rata rights and a most favoured nation clause - and those are worth asking for every time. (10 min)
• A side letter is where your specific rights live, and MFN is how you avoid being the worst-treated investor — Side letters grant individual investors rights outside the main documents. A most favoured nation clause entitles you to any better terms given to comparable investors in the same round. (10 min)

All 578 terms in the Investing glossary