Pro-Rata Rights and Their Impact
Pro-rata rights give existing investors the right to invest in future rounds to maintain their ownership percentage. If a seed investor owns 15% and the Series A would dilute them to 9%, pro-rata rights let them invest additional capital to stay at 15%.
Pro-rata rights are valuable to investors but create complexity for founders โ you may be obligated to carve out investment room for existing investors in every future round. Negotiate whether pro-rata rights are major or minor (different thresholds for exercise).