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What are pro-rata investment rights?


Pro-rata investment rights give an investor in a company the right to participate in a subsequent round of funding to maintain their level of percentage ownership in the company. This becomes a way for investors to continue to invest in companies that they want to put more into.

Pro-rata rights are not always granted to investors and cannot always be enforced. In practice, typically pro-rata rights are given to larger investors in rounds. Depending on their strategy, investors may or may not take up their pro-rata rights in subsequent rounds of financing.

Because FundersClub collects small checks and writes much bigger ones, one potential benefit for investors investing with FundersClub is that their small check can sometimes enable the investor to have access to follow-on fund opportunities when FundersClub receives pro-rata rights.

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