Pro-rata rights

An investor's right to invest again in future rounds to maintain their existing ownership percentage.

Example

A seed investor owning 10% has the right to buy 10% of your Series A.

Important

Reasonable and standard. Granting pro-rata to too many small investors, however, can crowd out the lead your next round actually needs.

Related terms

• Term sheet — A short, mostly non-binding document setting out the main terms of an investment before the full legal documents are drafted.
• Dilution — When new shares are issued, existing shareholders own a smaller percentage of the company than before.
• Follow-on investment — A later investment by an existing investor in a subsequent round.

Lessons that explain it

• Reading a term sheet — Two to four pages that decide the next several years. What each clause means and which ones actually matter. (15 min)

All 176 terms in the Founder glossary