Multiples’ Post

Term Sheet Win-Win for Startups and Investors #1: 𝐏𝐫𝐨-𝐑𝐚𝐭𝐚 𝐑𝐢𝐠𝐡𝐭𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐅𝐮𝐧𝐝𝐢𝐧𝐠 𝐋𝐚𝐧𝐝𝐬𝐜𝐚𝐩𝐞 They contain important terms, one being "pro-rata." Pro-rata, a standard and widely accepted term, safeguards investors' stakes as companies grow and raise more funds. Here's how it works: If an investor buys 10% of a company's shares in the first round and, in later rounds, new investors come in, that original stake could shrink to 8%. Pro-rata rights allow the initial investor to buy more shares to get back to 10%. This protects against equity dilution from new investors or increased capital raises. But there's a catch: the investor must buy the new shares at the valuation set in the new round. Pro-rata helps balance the interests of early investors and startups in a dynamic funding world. What's your strategy for balancing investor and startup interests? Share your thoughts on pro-rata rights! #vc #startups #TermSheet #Fundraising #menastartups #StartupSuccess #startupstrategy  #startupfunding #InvestmentTactics #MultiplesStartupAdvisory

To view or add a comment, sign in

Explore topics