Investors want to tranche a $1M seed round in 3 stages. Can I protect against them freezing remaining installments?

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.

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Published on February 24, 2020

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