Week 7 Exercise

As an entrepreneur I would be very concerned about the amount of power that investors would have in my company. This legally binding document states that not only will the investors own a certain percentage of the company, but are given a set number of seats on the board of the company. The investors should definitely make there money back and should definitely have equity in the company but I would argue that they shouldn’t have as much control within the company in respects to making business decisions.

The investors who are giving so much to this company should be concerned about their investment being squandered. If they are giving millions of dollars to a company, they have to make sure that the company is profitable and that they will see a return on their investment. The only way to do this is by having board members who have a say in what goes on in the everyday operations of the company. The investors should also be concerned about the events that will take place should the company fail or go out of business. In the event that the company’s assets are liquidated, there has to be language in the clause that clarifies how much the investors will receive since they are providing most of the funds used for the business.

Both the investors and the owners of the company should be worried about the direction of the company and who controls that direction. Even with owning the company, the owners have to give a say to the investors because of the amount that they are prepared to invest in the company. The contract awards seats on the board to these investors, giving them a definite position within the company. These seats give the investors power within a company in a field in which they do not have any expertise. These investors could use these seats to make controlling decisions within the company and could possibly lead to