Last updated: 2 November 2026
Pro rata rights let existing investors buy enough in a new funding round to keep their ownership percentage. They are a right, not an obligation, so nobody is forced to invest.
What are pro rata rights?
Pro rata rights are contractual provisions that let existing investors participate in future financing rounds at a level that maintains their current ownership stake, according to CRV. The key idea is preservation: the investor keeps the slice of the company they already hold, rather than watching it shrink as new money arrives.
They are a right, not an obligation. An investor can decline if the price, risk or fit no longer works. That flexibility matters, because declining means accepting dilution rather than committing more capital.
This matters most when a company raises again at a higher valuation. The right is about preserving a stake, not forcing fresh cash into every round. A founder should expect some holders to exercise and others to pass, and plan the round around both outcomes.
A Sifted survey, reported second-hand, says about 78% of VC firms include pro rata rights in deals. That figure is secondary and should be treated as reported, not independently verified. It still suggests the right is common in venture rounds.
How is the pro rata amount calculated?
The formula is simple: the investor’s ownership percentage multiplied by the total size of the new round equals the pro rata investment amount, as CRV sets out. In symbols, pro rata amount = ownership % x round size. The result is the cheque needed to stand still.
CRV’s first example: an investor holding 8% in a $5 million Series A needs to invest $400,000 to keep 8%. The arithmetic is 8% x $5,000,000 = $400,000. In plain terms, paying $400,000 buys exactly enough new shares to hold the same 8% after the round closes.
CRV’s second example: an investor puts $200,000 into a seed round at a $2 million post-money valuation, taking 10%. To keep 10% in a later $3 million raise at a $12 million pre-money valuation, they need $300,000. The amount tracks the new round, not the original cheque: 10% x $3,000,000 = $300,000.
A worked example: an investor owns 5% before a £10 million round, so the pro rata amount is 5% x £10 million = £500,000. If they skip it, they are diluted. New shares equal £10 million divided by (pre-money plus £10 million); with a £40 million pre-money, the new money is 20% of the company, so a 5% holder falls to 4%. In plain terms, paying nothing means the stake drops from 5% to 4% because the new money takes a fifth of the company.
| Example | Ownership | Round size | Pro rata amount |
|---|---|---|---|
| CRV Series A | 8% | $5m | $400k |
| CRV follow-on | 10% | $3m | $300k |
| Computed | 5% | £10m | £500k |
| Combined holders | 25% | £10m | £2.5m |
Who gets pro rata rights?
Typically, “major investors” above a threshold receive them. The NVCA model term sheet standard cited by CRV refers to investors holding “one to two percent of fully-diluted equity”. That keeps the right with holders who have a meaningful stake, rather than every small investor. In plain terms, a tiny cheque does not usually carry a follow-on right.
On a YC SAFE, pro rata rights are not in the SAFE itself. They live in an optional, standardised side letter. YC advises keeping the SAFE unmodified and giving agreed rights in a separate side letter. Founders should read any side letter before signing, as it changes the rights attached to the investment.
A Sifted survey is reported as saying about 78% of VC firms include pro rata rights in deals. That figure is secondary and should be treated as reported, not independently verified. It still suggests the right is common in venture rounds, and founders should expect to see it in term sheets.
What are super pro rata rights?
Super pro rata rights allow investors to actually increase their ownership stake in subsequent rounds. That is a step beyond normal pro rata, which only preserves the current percentage. Where normal pro rata keeps the cap table stable, super pro rata lets a holder grow their slice.
CRV advises approaching super pro rata rights carefully, since they can severely constrain your ability to bring in new investors. In plain terms, a holder taking more than their pro rata share leaves less room for everyone else.
For a founder, the difference matters. Normal pro rata keeps the cap table stable; super pro rata can crowd out new money and complicate a lead investor’s target allocation. It should be negotiated with the round’s overall needs in mind, not agreed in isolation.
How does pro rata affect a founder?
Pro rata allocation reduces the room for new investors in the next round. A lead may want a large share of the round, and existing holders with pro rata take part of it. The founder then has less flexibility to reshape the cap table or bring in strategic investors.
A worked example: in a £10 million round, existing investors with a combined 25% fully diluted stake exercise pro rata in full, taking £2.5 million of the round. That leaves £7.5 million for new money. The arithmetic is 25% x £10,000,000 = £2,500,000, leaving £7,500,000. In plain terms, a quarter of the round is already spoken for before any new investor is invited.
Practical advice: limit rights to investors above a threshold, check if rights lapse, and read side letters before signing. Tax rules can change and vary by circumstance, so readers should check HMRC guidance or take advice where relevant.
Frequently asked questions
Are pro rata rights mandatory for investors?
No. They are a right, not an obligation, so an investor can choose whether to invest. Declining may dilute their stake.
How do I calculate a pro rata amount?
Multiply the investor’s ownership percentage by the total size of the new round. For example, 8% of a $5 million round is $400,000.
Where do pro rata rights appear on a YC SAFE?
They are not in the SAFE itself. They sit in an optional, standardised side letter, which YC advises using separately from the unmodified SAFE.
What is the difference between pro rata and super pro rata?
Pro rata preserves an ownership percentage, while super pro rata allows an investor to increase their stake. Super pro rata can constrain a founder’s ability to bring in new investors.
Why do founders care about pro rata rights?
They reduce the space left for new investors in the next round. Founders should limit rights to larger holders, check for lapse terms, and read side letters carefully.
Sources
Figures and prices were checked on 2 November 2026; check the linked sources before relying on them. This article is general information, not tax, legal or investment advice.
