Pro Rata Rights
Also called Pro Rata
The right of an existing investor to invest enough in future rounds to maintain their ownership percentage as the company issues new shares.
Why it matters
Pro rata rights let early backers keep their slice of the winners, which is where fund returns concentrate. Founders negotiate who gets them because they take up room in future rounds.
For example
A seed fund with pro rata rights invests enough in the Series A to keep its 8 percent stake from being diluted by the new money.
Go deeper
Related terms
Also in Starting Up
See how founders actually handle this on Raising your first round, part of the Starting Up hub.
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