Pro rata right
In accounting, pro rata right means an investor's right to buy its proportionate share of a later round, so it can keep its percentage. In the NVCA model it belongs to Major Investors; on a post-money SAFE it lives in an optional side letter.
Also called Right of first offer.
Authority: NVCA model investors' rights agreement §4.1; YC Pro Rata Side Letter. Sources
The lessons that teach this
From the free founder back-office course, taught on one company's books, with exercises to work it yourself.
- Cap tableWays to raise: SAFEs, notes, priced rounds, debt and grants › MFN and pro rata side lettersYC's three post-money SAFEs — cap only, discount only, uncapped MFN — and the pro rata side letter that rides beside them.5 min
- Cap tableThe term sheet explained › Pro rata rightsThe right to buy into the next round, in the NVCA model's words.3 min
What it is not called
Each of these means something else. Use one here and an accountant reading the product notices.
- preemptive right alone
- MFN
Nearby in the catalog
No component names this concept outright. These sit in the same part of the system.
Also in Equity & financing
Defined in Lexicon. This page is generated from that document, so the two can't disagree.