pro rata

Definition

The right to maintain one's ownership percentage in subsequent funding rounds by investing additional capital proportionally. The 'I called dibs' clause of venture capital.

Example Usage

We exercised our pro rata rights in the Series B to avoid dilution, investing another $2M to maintain our 15% stake.

Origin

Latin phrase meaning 'in proportion,' used in finance since the 16th century

Fun Fact

Pro rata rights are worthless in failing companies (who wants to throw good money after bad?) but incredibly valuable in winners, making them asymmetrically important.

Source: Corporate finance and proportional investment rights

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synthetic exit

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co-investment rights

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advisor

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