We're looking at a possible seed deal right now. It's $750K from a firm who has a current fund size around half a billion. I have two questions.
The issue as I understand it is not that they have right of refusal, it is that other VCs will wonder why they are not electing to go through with it. So there is a much harder barrier there - and unless it is explained, my guess is that it will not go well.
Why not go with an angel(s) for that little money?
The total you are asking for is right in their wheelhouse, they'll be interested in investing in future rounds, but are more likely to defer to a new lead, and you get a lot of advisory talent at your fingertips.
I've worked with CommonAngels in the past and feel, for the early stage venture, they are a great match
"That little money" is relative to your network I think. We live outside of Silicon Valley and while we're talking to an SV VC we don't have a large network of angels in the area. It seems like if you've been in the Valley for a while or have a lot of friends who are multi-millionaires then stringing together $750K in angel is doable. However, if you don't, well, piecing together $750K in $25K and $50K chunks takes quite a while (15-30 investors).
I agree that the ROFR is not the issue. They basically have a ROFR on a seed deal whether it's an explicit one or not. It does seem like because of this your back is really against the wall when you go out to raise your next round unless you're just killing it. Anyone had any experiences to the contrary?