pre-emption rights

Definition

The contractual right of existing investors to lead or participate in the next funding round before the company can seek outside investors. It's a first-look deal built into your cap table.

Example Usage

Thanks to pre-emption rights, our Series A investor got first shot at leading the Series B on their own terms.

Origin

Adapted from real estate and securities law, became standard in VC term sheets

Fun Fact

Pre-emption rights can trap founders with underperforming investors who neither lead rounds themselves nor let others in.

Source: Venture capital rights and term sheet provisions

Related Terms

Advanced

co-investment rights

Special privileges allowing certain LPs to invest additional money directly into specific portfolio companies alongside the fund, usually with lower or no fees. The VIP backstage pass of venture investing.

🚀 Startup / VC

Beginner

qualified pipeline

Potential customers or deals that have been vetted and meet specific criteria, as opposed to raw leads. It's the difference between people who downloaded your whitepaper and people actually evaluating a purchase.

🚀 Startup / VC

Intermediate

pre-money valuation

What investors claim your company is worth before they invest—a number that's actually meaningless but gets thrown around in press releases. Add the investment amount to get post-money, which is what your ownership percentage is actually based on.

🚀 Startup / VC

Intermediate

flat round

A financing round raised at the same valuation as the previous round, suggesting a company has neither advanced nor declined—essentially treading water while burning cash. More diplomatically acceptable than a down round but almost as concerning to investors.

🚀 Startup / VC

Beginner

hot deal

A startup fundraising round with overwhelming investor demand, usually led by a top-tier firm with multiple others fighting for allocation. The velvet rope nightclub of venture capital.

🚀 Startup / VC

Beginner

ventures

Risky business undertakings or investments that could either make you rich or teach you expensive lessons about market dynamics. In startup speak, it's what venture capitalists fund, hoping that one unicorn will make up for the nine failures. Think of ventures as business experiments where the hypothesis is "this will make money" and the results are usually mixed.

🚀 Startup / VC

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