In negotiations with some new customers and have sent them all our standard Service Agreement. Some have asked for revisions but they have all been minor thus far.<p>One just came back and asked us to include additional language "giving them a Right of First Refusal (ROFR) to invest in all or a portion of the company, to ensure it is not sold to a competitor."<p>My primary customers right now are banks and they all seem to look at one another as a competitor regardless of how large or small they are.<p>The request initially seemed like a positive because I'm about to begin fundraising and I figured having a multi-billion dollar financial institution requesting the right to invest/purchase could be seen as plus to prospective investors. However, the more and more I think about i....I think it could potentially restrict growth and may be viewed as a negative by both customers and investors.<p>Has anyone else ever dealt with a scenario like this before?
I'm not an attorney, but have run across this before. The situation you'd want to avoid is one where a better-fit investor competes with your new customer and your new customer elects to beat their bona fide offer. Then you'd wind up in a worse situation due to the ROFR. You might think about how likely that is to happen.<p>Also, think about pushing back gently and determine if it is a deal breaker if you don't comply. They are trying to protect themselves, and it may be a standard approach for their legal department to ask for it. Perhaps counter with a commitment to disclose, under NDA, offers from other companies to invest in your company. If the situation ever arises, they can negotiate for a position at that point.<p>If it is a deal breaker and you still want them as a customer, push for some language that at least requires them to do a meaningful amount of business with you in order to include the ROFR. You might also put time limits on the rights, or require a payment of some sort. Add something that ensures their business is worth the concession.