1) Always get an experienced lawyer to review paperwork you sign.
2) It's pretty normal for people who give you money (be it a loan or an equity investment) to get their money back before you do in event of a sale.
Imagine the situation where you raised $5m for 20% of your company and then the next day you sold the entire company for $5m. You'd get $4m and the investor would get $1m, you'd be very happy and your investor very unhappy.
Hence no rational investor would give you money without a clause that ensured that in the case of an exit that they had priority upto the amount they invested.
2) It's pretty normal for people who give you money (be it a loan or an equity investment) to get their money back before you do in event of a sale.
Imagine the situation where you raised $5m for 20% of your company and then the next day you sold the entire company for $5m. You'd get $4m and the investor would get $1m, you'd be very happy and your investor very unhappy.
Hence no rational investor would give you money without a clause that ensured that in the case of an exit that they had priority upto the amount they invested.