Pro-Rata Right

What are pro rata rights?

Pro rata is a right that investors often request to avoid being diluted in a startup’s future investment rounds. These rights give investors the opportunity to participate in the startup’s next investment round.

For example, if an investor has pro rata rights and owns 10% in an investment round, then if the startup raises another investment round, the pro rata right gives this investor the right to participate in the new investment round and maintain that 10% in the company.

This is a very important right that several investors often request, but it’s worth keeping in mind that it shouldn’t be granted to every investor. If we grant this right to every investor, the founders risk being the only ones who get diluted.