What pro rata rights are
Pro rata rights (also called participation rights) allow an existing investor to buy shares in a future round to maintain their ownership percentage, subject to the round's terms and allocation.
Simple check-size estimate
A simple rule of thumb: to keep X% ownership, invest about X% of the new money in the round (priced equity, simplified).
What happens if you don't participate
If the company raises new money, new shares are issued. If you don't buy any of them, your ownership typically drops. A simple approximation uses the pre-money / post-money ratio to estimate dilution from the new issuance.
Allocation realities
- Your pro rata may be capped or cut in competitive rounds.
- Allocation is often tied to relationship, check size, and follow-on support.
- Ask about reserves and allocation policy before relying on pro rata.
Pro rata modeling checklist
- Use fully diluted ownership before the round.
- Include option pool increases and convertibles when estimating dilution.
- Model both partial and full participation scenarios.
Common mistakes
- Assuming you can always take full pro rata (allocation may be capped).
- Ignoring option pool increases and SAFE/note conversions.
- Mixing ownership defined on different bases (fully diluted vs issued).