# Pro rata rights

> Pro rata rights give an investor the right, but not the obligation, to buy enough shares in a future round to keep its percentage ownership. If a fund owns 8 percent of a company and it raises a new round, a full pro rata right lets the fund buy up to 8 percent of the new shares. Pro rata rights are set in the financing documents or, for SAFEs, often in a side letter.

Source: https://delsivo.com/glossary/pro-rata-rights · Updated 2026-11-06

## 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.

## Frequently asked questions

### Are pro rata rights standard for seed investors?

They are common for larger investors in priced rounds, often limited to major investors. On SAFEs they usually need a side letter.

### Do founders have to honour pro rata rights?

If the documents grant them, the company must offer the allocation on the stated terms. Investors can waive or reduce their take-up.

### What is a major investor threshold?

A minimum holding, set in the financing documents, that an investor must have to receive certain rights such as pro rata or information rights.

## Sources

- [NVCA: Model legal documents](https://nvca.org/model-legal-documents/) (checked 2026-11-06)
- [Y Combinator: SAFE financing documents](https://www.ycombinator.com/documents) (checked 2026-11-06)

## Related pages

- [Follow-on investment](https://delsivo.com/glossary/follow-on-investment)
- [Dilution](https://delsivo.com/glossary/dilution)
- [Term sheet](https://delsivo.com/glossary/term-sheet)
- [SAFE note](https://delsivo.com/glossary/safe-note)