What is a pro rata right?
FundraisingEquity
A pro rata right lets an existing investor buy enough of your next priced round to keep the percentage they hold, rather than being diluted with everyone else. For a SAFE investor it is granted in a separate side letter, and it applies to the round the SAFE converts in. The standard side letter is short: it names the investor, the SAFE it goes with, and the round it covers.
What it costs you
Every pro rata right is a promise to sell part of a future round to someone who is already in. That is room the new lead investor cannot have, and leads notice. Two or three side letters to early investors who are likely to follow on is normal. A side letter for every check in the round is a problem you will meet at your Series A.
Grant it deliberately, to investors who have said they will follow on and have the money to do it, and keep a list. When the priced round comes, the company has to honor each one.
Arabella's library carries the SAFE pro rata side letter, filled from the same questionnaire as the SAFE.
Related questions
Written by the lawyers who built Arabella. This is legal information, not legal advice for your situation, and reading it does not make us your lawyers. For a real dispute or a high-stakes decision, talk to a licensed attorney. More questions.