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.

Worth your time

The Pro-Rata Opportunity AVC · article A leading VC on why pro rata rights matter so much to funds, which tells founders exactly why they are negotiated so hard.

Related terms

Follow-On Investment Dilution Cap Table

Go deeper

See how founders actually handle this on Raising your first round, part of the Starting Up hub.

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