Deal Terms
Pro-Rata Rights
The right of existing investors to maintain their ownership percentage in future funding rounds by investing their proportional share.
Pro-rata rights (or preemptive rights) allow existing investors to invest in future financing rounds to maintain their current ownership percentage. If you own 10% post-Series A and want to maintain 10% post-Series B, pro-rata rights let you invest 10% of the Series B round. For VCs, pro-rata rights in breakout companies are enormously valuable — being able to put more capital into your winners at later stages (when risk is lower but returns can still be substantial) is one of the best features of VC investing. Super pro-rata rights give investors the ability to buy more than their pro-rata share. The flip side: if too many early investors exercise pro-rata, it can crowd out new Series B investors who might add more strategic value.