If you change material information on a deal after LPs have invested, we are required to send those LPs communication that explains the changes and provides them with the opportunity to cancel their investment. Not all changes require sending an opt out email, but many do.
If no LPs have invested into the deal yet, you may freely edit information without sending an opt out. As with the initial information you submit on a deal, any edited information must also be complete and accurate.
What are material changes?
Generally, a change is material if a reasonable investor is likely to think the change alters the total mix of investment information.
As a rule of thumb, changes that make a deal materially worse for an LP require an opt out, such as:
- Removing Pro Rata rights
- Changing from Primary to Secondary Shares (or vice versa)
- Discount Decreases
- Updates to Disclosures
- Decreasing Lead Investment Amount
Changes to any of the following fields may result in sending an LP opt-out. The AngelList team will work with you to review the specific changes and determine whether an LP opt-out must be sent.
- Instrument Type (SAFE, Equity, Debt)
- Valuation Cap
- Lead Co-investor or Co-investor Commitment Amounts
- Country of Incorporation
- Type of Incorporation
- Affiliated ERA
- Default Carry
- Significant Changes to Deal Memo
Why is it important to provide LPs the opportunity to opt out after making a material change to the deal?
Keeping your LPs up to date on all the material terms of the deal is crucial to ensuring the LPs can make informed investment decisions. LPs made their decision to invest based on the information available at the time. If that information changes, they have the right to reconsider their investment. By providing notice of any changes (and opt out, as required), you help reduce the risk that LPs will be surprised by the ultimate deal terms, an area to which the SEC pays particular attention.
If you have questions, please contact your account manager or email firstname.lastname@example.org.