Deal Terms
Last updated
Quick Answer
A contractual right giving a party the first opportunity to match any offer before shares can be sold to a third party.
Right of First Refusal (ROFR) gives existing shareholders or the company the right to match any offer that a selling shareholder receives from a third party. In venture, ROFRs are standard in investor rights agreements and company bylaws. When an employee or investor wants to sell shares, they must first offer them to ROFR holders at the same price and terms before completing a third-party sale.
In Practice
An employee wants to sell $200K of vested shares to a secondary buyer at $10/share. The company's ROFR gives it 30 days to purchase the shares at $10/share. If the company declines, existing investors get 15 days to exercise their ROFR.
Why It Matters
ROFRs help companies and investors control who enters the cap table. They can complicate secondary sales but protect against unwanted shareholders gaining positions.
VC Beast Take
ROFR seems founder-friendly on paper but often becomes a liquidity trap in practice. We've seen talented employees unable to exercise options because the company won't waive ROFR and they can't afford to hold illiquid shares. Progressive companies are moving toward more flexible structures that balance control with real liquidity opportunities for stakeholders.
VC Term Sheet Template & Guide: Every Clause Explained with Examples
A clause-by-clause breakdown of every standard VC term sheet provision — what each term means, what's market, what to negotiate, and the red flags that cost founders millions.
NVCA Model Legal Documents: Every Form a Startup Founder Needs
The NVCA publishes free legal templates that can save you $10-30K in lawyer fees. Here's every document explained in plain English, plus what to watch for.
Term Sheet Template: Free NVCA Templates, Examples, and Key Terms Explained
A term sheet is the blueprint for your startup deal. We break down every section of the NVCA model term sheet — economic terms, control terms, investor rights — so you know exactly what you're signing.
How to Read a VC Term Sheet (Line by Line)
We break down every section of a VC term sheet: valuation, liquidation preference, board seats, anti-dilution, vesting, and no-shop. What's standard vs predatory.
The VC Term Sheet Glossary: 50+ Terms Every Founder Must Know
Liquidation preference, anti-dilution, drag-along rights — term sheets are designed to confuse you. Here's every term explained in plain English, with what's founder-friendly vs. what to push back on.
Extension Rounds: When to Bridge and How to Structure
Extension rounds can save a startup or sink it. Learn when bridging makes strategic sense and how to structure convertible notes and SAFEs to protect your equity and cap table.
Right of First Refusal (ROFR) gives existing shareholders or the company the right to match any offer that a selling shareholder receives from a third party. In venture, ROFRs are standard in investor rights agreements and company bylaws.
Understanding Right of First Refusal is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Right of First Refusal falls under the deal-terms category in venture capital. This area covers concepts related to the financial and legal terms that define investment agreements.
Newsletter
Join thousands of founders and investors. Every Tuesday.
The VC Beast Brief
Master VC terminology
Get smarter about venture capital every week. Our newsletter breaks down the terms, concepts, and strategies that matter.
VentureKit
Ready to launch your fund?