Q: Investors want to tranche a $1M seed round in 3 stages. Can I protect against them freezing rest of installments?
No.
You can never assume a second tranche will come, and in essence, the investor will be able to at least soft-veto any other financing sources for the next tranche.
If an investor wants to do tranches:
- Find an investor that doesn’t; or
- Assume the second tranche never comes.
If you have no other options, and can get by with just the 1st tranche, then go for it I guess.
But never, ever assume the second tranche comes.
It often doesn’t.
