ROFR & Co-Sale: Control Over Cap Table

Right of First Refusal (ROFR) and Co-Sale rights are the mechanisms investors use to control who can join — and who can exit from — your cap table.

Right of First Refusal (ROFR): If a shareholder wants to sell shares to a third party, ROFR gives investors (and sometimes the company) the right to purchase those shares first on the same terms. The seller notifies the company and investors of the proposed terms. Investors have a defined period (typically 20–30 days) to exercise or decline.

Co-Sale Rights (Tag-Along): If a founder sells a significant portion of shares to a third party, co-sale rights allow investors to sell a proportionate amount of their own shares in the same transaction on the same terms.

Why It Matters

ROFR: Limits your ability to sell secondary shares or bring in a new strategic shareholder without investor knowledge. Prevents cap table changes investors haven't consented to.
Co-Sale: Can constrain personal secondary sales. If you want to take money off the table before an exit, investor co-sale rights can make the transaction impractical if not carefully structured.

Key Negotiation Points

ROFR threshold: Apply only above a certain volume of shares. Routine small transfers (estate planning, family trusts) should be exempt.
Notice periods: 15–20 days is more practical than 30–45 days for time-sensitive deals.
Co-sale carve-outs: Transfers between founders, to family members, or to founder-controlled entities should be exempt.
Company vs investor ROFR: Understand the order of priority — company ROFR first, investor secondary.

Evolv's Recommendations

Accept ROFR and co-sale as standard — they exist for legitimate reasons and are in virtually every institutional term sheet.
Negotiate the thresholds, notice periods, and exemptions carefully.
If you plan secondary sales before an exit, understand exactly what approval or notification is required before you approach a buyer.

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