Legal & Compliance
Right of First Refusal (ROFR)
Last updated
Quick Answer
A contractual right allowing a company (or existing investors) to purchase shares before a shareholder sells them to an outside party.
A Right of First Refusal (ROFR) gives the holder (typically the company and/or existing investors) the right to purchase shares that a shareholder wants to sell to a third party — on the same terms the third party is offering. Process: shareholder receives an offer → notifies company → company (and investors) have X days to match the offer → if they don't, shareholder can sell to the third party. ROFRs appear in two contexts: startup charter documents (protecting against unexpected secondary share transfers) and M&A (incumbent investors can match acquisition offers). ROFRs create friction for secondary sales — potential buyers know they may spend time negotiating only to have the ROFR holder swoop in. Many secondaries require ROFR waiver as a closing condition.
Related Concepts
Further Reading
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.
Secondary Sales for Startup Founders: When and How to Sell Shares
Founder secondary sales let you convert paper equity into real liquidity before an exit. Learn when to sell startup shares, how to structure the transaction, and what pitfalls to avoid.
Drag-Along and Tag-Along Rights: A Founder's Guide
Drag-along and tag-along rights determine who controls your exit. Here's what every founder needs to know before signing a term sheet.
The VC Secondary Market Boom: What It Means for Founders and Investors
The venture secondary market hit $152B in 2025. As liquidity timelines stretch to 10+ years, secondaries are becoming essential infrastructure for the entire VC ecosystem.
Corporate Venture Capital: How Big Companies Invest in Startups
A practical guide to how corporate venture capital works, how it differs from traditional VC, and how founders can evaluate and negotiate CVC investment on strategic and financial terms.
Secondary Markets for Startup Equity: How to Buy and Sell Private Company Shares
How secondary markets for private company shares work — who buys and sells, how pricing is determined, the legal and tax mechanics, and what both sides need to understand before transacting.
Frequently Asked Questions
What is Right of First Refusal (ROFR) in venture capital?
A Right of First Refusal (ROFR) gives the holder (typically the company and/or existing investors) the right to purchase shares that a shareholder wants to sell to a third party — on the same terms the third party is offering.
Why is Right of First Refusal (ROFR) important for startups?
Understanding Right of First Refusal (ROFR) is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
What category does Right of First Refusal (ROFR) fall under in VC?
Right of First Refusal (ROFR) falls under the legal category in venture capital. This area covers concepts related to the legal frameworks and compliance requirements in venture capital.
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