Glossary - Co-investment
Co-investment refers to a scenario where two or more investment firms, or individual investors, jointly invest in a particular target company or project. This arrangement allows the investors to pool their resources, share the investment risk, and benefit from each other's expertise, while potentially increasing their leverage and investment capacity. Co-investments are commonly found in private equity, venture capital, and real estate investments. They offer the co-investors the chance to directly invest in a company alongside a lead investor without paying the management fees and carried interest typically associated with fund investments.
Also known as
- Syndicated investment
- Joint investment
Use cases examples
- Investment Agreement: The parties herein agree to a co-investment of $5 million in XYZ Startup, whereby Investor A and Investor B will each contribute 50% of the investment amount.
- Co-Investment Side Letter Agreement: Pursuant to the terms of the side letter agreement, the co-investor agrees to participate in the funding round of the Target Company on the same terms and conditions as set forth in the Lead Investor's main subscription agreement.
Considerations for investors
- Assessing the compatibility of investment philosophy and exit strategies among co-investors.
- Negotiating the terms of the co-investment to clarify the rights, obligations, and protections for each party involved.
Considerations for founders
- Ensuring alignment of interests among all co-investors to avoid potential conflicts.
- Understanding the governance and decision-making implications of having multiple investors with potentially varying objectives.
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