Editing Right of first refusal (section)

==In venture capital==
In venture capital deals, the '''right of first refusal''' is a [[term sheet]] provision permitting existing investors in a company to accept or refuse the purchase of equity shares offered by the company, before third parties have access to the deal. The main goal of the provision is to allow investors to prevent [[stock dilution|ownership dilution]] as the company raises additional capital. Typically, the provision will exempt certain types of shares, such as those in an employee pool, or shares issued to equipment loaners or lessors.<ref>{{cite web|url=http://www.emergingenterprisecenter.com/Resources/AskTheStartupLawyers/Investor%20Rights/What-is-a-right-of-first-refusal-on-Company-sales.aspx|title=What is a "right of first refusal" on Company sales?|date=Nov 4, 2009}}</ref><ref>{{cite web|title=Term Sheet: Right of First Refusal|author=Brad Feld|url=http://www.feld.com/wp/archives/2005/06/term-sheet-right-of-first-refusal.html|date=2005-06-01}}</ref> [[Startup company|Startup companies]] are advised to attempt negotiating out this right, because it enables existing investors to send stronger (potentially negative) signals to new investors, and consequently drive down the company's valuation.<ref>{{cite web|url=http://venturehacks.com/articles/options-open|title=Keep your Series A options open if you raise debt|author=Babak Nivi|date=2007-05-08}}</ref>