Key takeaways
- A right, not an obligation: the investor chooses round by round.
- Using it keeps the investor's percentage steady; it costs fresh money.
- Rights are often limited to "major investors" above a set holding.
How pro rata rights work
A fund owns 8 percent. The company issues 2,000,000 new shares in its Series A. A full pro rata right lets the fund buy up to 160,000 of them, which keeps its stake at 8 percent after the round. If it buys none, it is diluted like everyone else.
Where pro rata rights are written
In US priced rounds, the right usually sits in the investors' rights agreement; the NVCA publishes a model Investors' Rights Agreement among its financing documents. Y Combinator's standard SAFE does not include pro rata rights; YC offers them in an optional, standardised side letter. Check the exact wording: some rights cover only the next priced round.
Pro rata in a fund's process
Funds keep reserves to take up pro rata in companies that are doing well, and decide each case as a new investment. When a round is oversubscribed, a new lead may ask existing investors to take less than their full allocation, so a right on paper does not always mean a full allocation in practice.
Common confusions
- Pro rata versus super pro rata: super pro rata lets an investor buy more than its current share.
- Pro rata versus anti-dilution: anti-dilution adjusts price in a down round; pro rata lets the investor buy in.
- Pro rata is not automatic. Investors must usually respond within a notice period.
Sources
- NVCA: Model legal documents (checked 6 November 2026)
- Y Combinator: SAFE financing documents (checked 6 November 2026)
Facts about other companies and services come from the pages listed, on the dates shown, and can change.