There are two things to pay attention to in this term that can be negotiated. First, the share threshold that defines a “Major Investor” can be defined. It’s often convenient – especially if you have a large number of small investors – not to have to give this right to them. However, since in future rounds, you are typically interested in getting as much participation as you can, it’s not worth struggling with this too much. A more important thing to look for is to see if there is a a multiple on the purchase rights (e.g. the “X times” listed above). This is an excessive ask – especially early in the financing life cycle of a company – and can almost always be negotiated to 1x.
Brad Feld has been an early stage investor and entrepreneur since 1987. He is currently a Managing Director at Foundry Group. Prior to co-founding Foundry Group, he co-founded Mobius Venture Capital and, prior to that, founded Intensity Ventures. Brad is also a co-founder of TechStars.