Term sheet clause 12 of 25 · Investor rights
Pro-rata rights in a term sheet
In plain English: Right to invest in future rounds to keep ownership %. Typical: Common for lead and major investors.
Founder-friendly
Pro-rata for major investors only.
Investor-friendly
Super pro-rata for all.
What to watch for
Red flag
Super pro-rata (right to buy more than their share).
How to model it
Don't judge this clause by reading it; put numbers on it. In our workbooks it's modelled in Pro-Rata tab, so you can see what it changes in your ownership or your payout before you agree.
Negotiating it: pro-rata and round size
Principle: Leave room for the next lead.
- Grant pro-rata to major investors only.
- Avoid super pro-rata.
- Check how much of the next round existing pro-rata would take (Pro-Rata tab).
Investor asks for super pro-rata
"We want to keep room for a strong lead next round. We're happy to offer standard pro-rata, and to give you an early look at the next round."
One of the scripts from the Negotiation Playbook. The playbook has more for each topic, plus what to give and what to hold.
Not legal advice. Norms vary by country and market cycle. Have a startup lawyer review your term sheet before you sign.