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A “right of first offer,” also known as a “pre-emptive right,” provides an investor in a company with the right to participate in future financing rounds so that the investor can maintain its ownership percentage in the company. Rights of first offers are referred to in shorthand as ROFOs.
There are many elements to ROFOs. Let’s break them down.
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This is second part of the post on dilution. The first post discussed ownership dilution, also known as equity dilution. The first post can be found here: http://www.allenlatta.com/allens-blog/dilution-part-one-understanding-ownership-dilution
As discussed in part one, I view dilution as having two components: ownership (equity) dilution and value dilution. These concepts are related. Let’s now explore value dilution. I am pleased to be participating in a webinar for family offices presented by the Context Family Network on September 25, 2020. I will be interviewing the Chief Investment Officer for a family office that actively invests directly in private technology companies. The Context Family Network website can be found here: contextfn.com/.
The word “dilution” is used often private equity, particularly in venture capital financings. One can hear venture capitalists and founders say they don’t want to be diluted. But what are they talking about when they say this? That’s the topic of this post.
I view dilution as having two components: ownership dilution and value dilution. These concepts are related. In this post, we’ll take a look at ownership dilution. We’ll look at value dilution in a later post. |
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