ROFR (Right of First Refusal)

Company's first chance to buy shares before outsiders

What it is

A Right of First Refusal gives the company (and often its investors) the first chance to buy shares before an existing holder can sell them to an outside party. If a founder wants to sell stock, the company can match the offer and buy it first. It keeps control over who joins the cap table.

Why it matters

ROFR stops shares from drifting to unwanted outside owners and lets insiders maintain control of the ownership base. Anyone holding startup equity should know it can limit their ability to sell.

Resources

NVCA ROFR & Co-Sale Agreement

nvca.org

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