Pro-rata rights

How it works

Pro-rata is the most-fought-over right at seed. Investors want it because it lets them double down on winners; founders push back because it crowds out new lead investors. Most term sheets give pro-rata to all preferred shareholders, capped at the size of their original investment. Major investors (5%+) almost always get pro-rata and often super-pro-rata.

Related terms

• Dilution
  Dilution is the reduction in an existing shareholder's ownership percentage that happens when a company issues new shares — typically when raising a new round.
• Term sheet
  A term sheet is a non-binding document outlining the key terms of a proposed investment — valuation, amount, board seats, liquidation preference, anti-dilution, and other rights.
• SAFE (Simple Agreement for Future Equity)
  A SAFE is a short investment contract that gives an investor the right to receive shares in a future priced round, without setting a valuation today.