Pro rata rights
The right to invest in the next round in proportion to your current stake, so your ownership percentage is not diluted.
A pro rata right entitles an existing investor to participate in a future financing up to the amount that preserves their ownership percentage. It is a right to buy, never an obligation: the investor can exercise in full, in part, or not at all. On priced equity the right is often part of the standard preferred package (sometimes via statutory preemptive rights); on SAFEs and notes it usually arrives as a side letter, since the base instruments carry no such right by default.
The economics cut both ways. For the investor, pro rata is how a fund concentrates capital into its winners; for the company, every reserved allocation is a slice of the next round that the new lead cannot have. Leads price rounds expecting a target ownership; when insider rights consume too much of the raise, something gives: the round grows, the lead’s target drops, or someone waives.
The founder’s job is a clean register: who holds pro rata, on what basis it is calculated (fully diluted is the honest denominator), and what the aggregate claim represents against the next planned round. Waivers are negotiable, and far easier to negotiate before a term sheet than across the table from the lead who just discovered the round is over-allocated.
In a capital-intensive roadmap, insiders exercising pro rata is one of the cleanest signals a new lead reads: the people with the most information are buying again. The flip side is allocation arithmetic. Quantum seed rounds hand out pro rata side letters generously, and at a modest Series A the sum of those rights can collide with the 15 to 20% ownership a lead wants; founders should track the aggregate before the round, not during it.
An investor holds 10% of the company on a fully diluted basis. The Series A issues 2,000,000 new shares. Pro rata entitles the investor to purchase 10% of the new issuance, 200,000 shares, at the round price. Buying them keeps the investor at 10% after the round; declining lets the stake dilute to 10% × (old share count / new share count), the normal arithmetic of new issuance, assuming those 2,000,000 shares are the only new issuance. Maintaining 10% also means covering the round's option-pool top-up: buying 10% of the priced shares alone leaves the investor short, because the new pool dilutes them just as it dilutes the founders.
From definition to decision
Model this in your own round, scenarios, dilution and runway, in the founder workspace.