graduated rights

Definition

Term sheet provisions where investor rights decrease as the company hits performance milestones. A way to say 'we trust you more as you prove you're not incompetent.'

Example Usage

The graduated rights clause meant our board would shrink from 5 to 3 seats once we hit $10M ARR, giving founders more control.

Origin

Negotiated term structures emerging in the 2010s founder-friendly environment

Fun Fact

Graduated rights are rare because investors hate giving up control, even when a company is crushing it—power is addictive.

Source: Venture capital term sheet innovations

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