Private Equity and Venture Capital in Europe

9.2. The Contractual Package

The “contractual package” defines the commitment of the equity investor to the venture-backed company. It impacts and sustains value creation and allocates duties and rights between the equity fund and the venture-backed company.

The contract facilitates management and control and identifies the proper combination between risk and return. Contract design is developed through three different approaches:

• Targeting
• Liability profile
• Engagement

Each approach is broken down in Figure 9.5.

Figure 9.5. The contractual package.

The first approach is by targeting an investment vehicle; the valuation of the alternative ...