Registration Right

You create an app that tracks people's adverb usage and gives them a little shock when they overuse them. (You distinctly hate when people grossly, aggressively drop unnecessary adverbs into sentences.) Your app draws a lot of investor interest. One fund, Grammar Champ LLC, gives you a $100,000 investment. In return, they get 25% of the company.

After a while, the people at Grammar Champ want you to take the company public. Things have been going well, and they've determined that an IPO is the best way for them to extract value from their investment. However...you don't want to. What's more, you still own 75% of the company, so you get the final say on what happens.

Except...when you sold the investment to Grammar Champ, you gave them registration rights. This stipulation gives the investor (even a minority investor) the right to force the firm to take the shares public. That way, Grammar Champ can sell the stock to the public and cash in on its investment.

After all, the end game of early investments often comes down to an initial public offering. People who put money into a speculative venture can use the IPO to unlock a return from their early stock purchase. But the decision to go public might be out of an investor's hands. If they only hold a minority position, they have to wait until the major investors are on board with the decision to sell stock to the public. However, if they negotiate a registration right, they can require the firm to list the shares on a public exchange, register them with the SEC, and conduct an IPO.