Depending on the phase, the participation of investors takes place under more or less great uncertainty and usually covers a medium to long term. In the case of longer maturities, not all contingencies can be taken into account when the contract is concluded. Macro- or microeconomic risks are usually not foreseeable at this point in time or at least cannot be accurately assessed. The performance of the company and the goals it has set itself also represent a risk for investors if they are not achieved.  Milestones can be used here. Milestones are defined goals that are decisive for the valuation of the company from the perspective of investors and serve as a kind of security for them. It can be agreed, for example, that in the event of non-compliance with the milestones or major deviations from the deadlines, no payment will be made, which can, however, get the company into difficulties or, alternatively, that the investor will receive an adjustment of his shares. This presupposes that the goals achieved with the individual milestones are measurable.

In practice, two different types of milestones occur. One is (1) investment milestones, the other (2) valuation milestones.

In the case of investment milestones, the amount of financing is linked to certain (partial) successes at certain points in time. Investors usually pay a first tranche of the total financing amount after completion of the financing round. All further tranches are then paid out when the milestones are reached. Investors thus reduce their risk.  As described above, in the worst case these agreements could cause significant difficulties for the Company if certain milestones are not reached. However, this also puts the investor’s investment at risk.  In contrast to the investment milestones described, the valuation milestones do not concern the financing amount but the valuation of the company. This can be increased or reduced accordingly if the milestone is reached or not reached.

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