Rights & follow-on
Information rights
The contractual right to receive financial statements, budgets and updates from the company on a defined schedule — rather than depending on the founder remembering to write.
In plain English
Information rights turn the flow of news from a favour into an obligation. A typical package includes annual audited or reviewed accounts, quarterly management accounts, an annual budget approved by the board, and a capitalisation table on request. Fuller packages add monthly reporting and a right to inspect the books.
The value is partly informational and mostly behavioural. A founder who must produce quarterly numbers for investors produces quarterly numbers, and a company that measures itself quarterly manages itself better than one that does not. Several experienced angels regard the discipline imposed on the company as worth more than the documents received.
The practical reality is that reporting decays with company health. Updates arrive monthly for the first year, quarterly for the second, and then stop — and the silence usually begins around the time something has gone wrong. A contractual right does not fix this on its own, but it gives you a basis for asking that does not depend on goodwill.
Rights are typically restricted to "major investors" over a threshold, because a company with two hundred small shareholders cannot sensibly report to all of them individually. The standard solution is a general investor update to everyone plus formal rights for the larger holders.
What it means for your cheque
Ask for the general investor update at minimum, in writing, and confirm you are on the list. It costs the founder nothing — they are writing it anyway — and it is the difference between hearing about a bridge round in time to participate and hearing about it afterwards.
Treat consistent, honest reporting as a genuine signal in follow-on decisions. Founders who report clearly through a bad quarter are a different proposition from founders who go quiet. Over a ten-year holding period the correlation between reporting discipline and outcome is one of the more useful things an angel learns.
Do the arithmetic
What a reasonable information package contains
The distinction between what a major investor typically receives and what a small holder should ask for.
| Annual accounts | Major: yes, audited or reviewed. Small holder: yes, ask for it |
|---|---|
| Quarterly management accounts | Major: yes, within 45 days. Small holder: rarely granted |
| Annual budget | Major: yes, before the year starts. Small holder: rarely |
| Cap table on request | Major: yes. Small holder: worth asking, often granted |
| Narrative investor update | Both: ask to be on the list — this is the one that matters most |
| Inspection rights | Major only, and rarely exercised |
For a small cheque, being on the investor update list and able to request the cap table covers most of the practical value. The formal package matters more to funds than to individuals.
At the table
What to negotiate
- Ask to be added to the regular investor update distribution — the cheapest and most useful ask on this list.
- Request annual accounts and a cap table on request, even if quarterly reporting is reserved for major investors.
- Check the major-investor threshold. If you are just below it, ask to be included; thresholds are often set arbitrarily.
- Agree a deadline for delivery. "Within 45 days of quarter end" is enforceable; "promptly" is not.
- Where rights are restricted, ask whether the syndicate lead or nominee will pass information through to you.
Information rights: common questions
What is a major investor?
What can I do if the company stops reporting?
Do information rights let me see the cap table?
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