Structuring Venture Capital (VC) Deals: Legal Strategies to Protect VC Interest

In today’s world, technological innovation and economic advancement are largely driven by Venture Capital (VC). Venture capital deals are critical in triggering the growth of innovative startups with a potential for rapid development by providing the necessary funding to boost operations, accelerate growth and penetrate new markets.

Superficially, it appears straightforward to strike a deal with the model of raising capital to invest in early and growth-stage companies. However, in an ever-changing VC industry where innovations are accompanied by a large element of risk, there are multiple dynamics underpinning choices of VCs when aiming at sustain-able growth and Returns on Investment (ROI) VC success rates vary widely though it is generally accepted that a significant portion of funds do not achieve their target returns! According to some industry reports, only about 5% of VC funds generate 95% of the industry’s returns. A2023 study by Cambridge Associates found that the 20-year annualized average return’ for VC funds was 12.33% compared with 12.40% for the MSCI All-Country World Index of global stocks. Meanwhile, research from Harvard Business School suggests that as many as 75% of venture-backed companies never return cash to investors.