Side Letter

A side letter is essentially a secondary agreement used to create bespoke terms between two parties. Side letters can exist between venture capitalists (including fund managers/GPs and deal leads) and their limited partners (LPs), as well as between startup companies and their VCs. The primary purpose of a side letter is to give an investor (either a VC or LP) some special or additional rights that are not granted to all of the other investors involved in a transaction. In almost all cases, these additional rights are advantageous to the investor.