How will a venture capital firm structure its investment?

Most venture capitalists generally take preferred stock in a corporation in exchange for their investment dollars and typically expect to receive certain rights regarding their investment, including

the right to elect one or more directors to the corporation's board of directors; the right to receive a liquidation preference over common shareholders in the event of a sale of the company; the right to receive a price adjustment if the company sells additional stock at a price lower than the price the venture capitalists paid; and the right to receive financial and other corporate reports and information.

A venture capital Stock Purchase Agreement tends to contain the following:

The price of the stock to be sold and number of shares to be purchased

Representations and warranties by the company about the condition of the business

Various covenants by the company

Conditions to closing the deal