Q: How do you convince a VC to remove the veto rights on sale provision in a Series A?
It’s hard to get a VC to remove any rights — before the next round.
So the simplest way to get rid of problematic clauses is to get the next round VC to include removing them as part of their term sheet.
Otherwise, there is little incentive to simply give up any rights. A VC can always say, “we won’t veto any fair deal”, and that likely will be true, and even fair. The term was part of the stock sale, after all.
Re: voting rights in particular, bear in mind that VCs basically have veto rights no matter what is in the docs. There are veto rights built into California and Delaware law. And most acquirers won’t buy a company unless 95% or more of the shareholders agree anyway.
Published on February 2, 2021