[jacquesm]

Another note about 'internal' investors getting preferential treatment as opposed to outsiders: this is usually a result of SHA conditions and elements in the articles of incorporation that stipulate that in case of a sale or issue of new shares existing shareholders have first right of refusal. That this makes for a less competitive environment is something that everybody seems to take as normal, but after reading this article I'm wondering if it really should be normal or of there are other important reasons why this right always seems to be granted.

[sytse]

You should avoid giving a right of first refusal even at great cost (20% valuation discount).

If there is a right of first refusal many investors will decline to engage in future rounds since if they end up negotiating a good deal it might fall apart at the last moment.