We received a pre-emptive term sheet for a Series B of a raise of around $25m at around a $90m Pre. The lead VC has asked for Veto Rights to block an acquisition if the company would get less than 2x a return on their investment in that acquisition.

Have you seen veto rights like this? If so, is 2x threshold market normal or is there a lower threshold that's more normal (e.g. 1.5x)?

Written by Mia Scott

Updated over 5 years ago

Yes. It isn’t an uncommon construct. It is actually more common to not have a hurdle at all for this investor veto right on a sale, although companies usually try not to give one individual investor this veto right – rather it is preferable to require a majority of the Seed, Series A and B voting together as a class for the veto. If you have to give one investor a veto however then setting a hurdle like this is a common approach.

As for the threshold, anywhere between 1.5x and 3x are typical. 2 and 3x the most.

We received a pre-emptive term sheet for a Series B of a raise of around $25m at around a $90m Pre. The lead VC has asked for Veto Rights to block an acquisition if the company would get less than 2x a return on their investment in that acquisition.