TLDR:
An investor rights agreement is a contract between a company and its investors specifying certain rights granted to investors, such as information rights, inspection rights, registration rights, and pro-rata participation rights in future rounds.
Why Investor Rights Agreements Matter
Investor rights agreements formalize the ongoing relationship between investors and the company post-investment, beyond the one-time terms of the financing itself. Information rights ensure investors can monitor their investments through quarterly and annual financial reporting. Board observer rights allow major investors to attend board meetings without voting, maintaining oversight. Registration rights (S-1 demand registration, piggyback registration) give investors the contractual ability to participate in a future IPO registration process, critical for investors who need liquidity through public market sales.