Hidden Conflicts Lurking In Later-Round Cap Charts

Law360, New York (May 19, 2016, 10:22 AM EDT) -- Consider the following: Your fund is offered the opportunity to co-invest at a level of 5 percent in a new C round. The good news is that (1) the portfolio company has real potential, (2) other funds (including the fund calling you with the opportunity) invested in both the A round and B round, (3) the company's valuation has increased for each round (and those increases are supportable), and (4) more than half of the existing A and B investors (including the lead investors in the B round) have exercised their rights to co-invest in the new C round. It all "sounds good."...

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