What is Pro-Rata Rights?

Pro-rata rights allow existing investors to participate in future funding rounds to maintain their ownership percentage. Without pro-rata, your stake gets diluted with each new round.How it works:You own 10% after Series ASeries B raises $20M at $80M pre-money (20% of company)Without pro-rata: Your 10% dilutes to 8%With pro-rata: You can invest $2.5M to maintain 10%Why it matters: Early investors want to double down on winners. Pro-rata lets them invest more in companies that are succeeding.Common terms: Major investor (>X% ownership) may have pro-rata rights; smaller investors often don't.Why pro-rata rights matter for early investors: For seed and Series A investors, pro-rata rights are among the most valuable terms in a deal. Early backers gain access to invest additional capital in later rounds at prices that still reflect significant upside. Without these rights, an investor who helped a startup at its riskiest stage could see their ownership steadily shrink through Series B, C, and beyond. Pro-rata rights serve as a critical tool to prevent dilution in subsequent funding rounds by allowing investors to purchase enough new shares to maintain their original percentage. In practice, not every investor exercises their pro-rata. Investors may waive their rights when they lack the capital to follow on, when the company's trajectory no longer fits their thesis, or when they strategically choose to let other investors lead. Some funds also waive selectively to preserve relationships with co-investors who want larger allocations in oversubscribed rounds.