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The Wrong of First Refusal

Vanessa the velociraptor and I recently (well maybe not so recently) went to talk about early-stage companies.

Much of the advice was untargeted and overly general to the point of being dangerous. Had we been a mature massive marine mammal company it might have applied, but most of the audience was filled with regal reptiles.

It was only terribly disappointing until the speaker said that it was OK to lightly give “rights of first refusal” because it wouldn’t affect the price.

We felt like screaming (and velociraptors can be very loud) and left.

As a buyer or investor, would I put in the time and effort for due diligence and pricing knowing someone else could just walk in and take the deal after I have done all that work?

As a small company, I can’t agree to a lockup period for due diligence or sell an option for that peroid.

It is likely to to make the otherwise valuable company worthless.

If only that talk had just been worthless rather dangerous.

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Written by Russell Brand

Russell has started three successful companies, one of which helped agencies of the federal government become very early adopters of open source software, long before that term was coined. His first project saved The American taxpayer 250 million dollars. In his work within federal agency, he was often called, “the arbiter of truth,” facilitating historically hostile groups and factions to effectively work together towards common goals

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