As a result, the investor needs some way to step in if the entrepreneur doesn't perform his side of the deal. When other people's money is involved the law imposes fiduciary duties to oversee and monitor the investment in a prudent manner. They also receive information- monthly operating reports, quarterly unaudited and audited financial statements. Separate approval of the investor Directors may be required for such items as major capital expenditures, borrowing from banks or deviations from previously approved business plans. Vesting of the stock of key management provides a penalty if managers leave the business.
Employment agreements including non-competition covenants also help keep the entrepreneur focused.
Stock option pools enable management to bring in additional personnel to help growth the business and can provide additional incentives to senior managers. Aimed with an understanding of these two categories of investment terms, the entrepreneur may be able to negotiate variations on these terms which address the investor's underlying concerns without unduly constraining the entrepreneur.