The short answer
Pro rata rights give an investor the right, but not the obligation, to invest in your future rounds so they can keep their ownership percentage. For SAFE investors, Y Combinator puts this right in an optional side letter rather than in the SAFE itself.
- Pro rata is a right, not an obligation.
- It lets an investor maintain their percentage in a later round.
- On YC SAFEs it lives in an optional, standardized side letter.
- Too many pro rata commitments can crowd out new investors in a hot round.
How it works
When you raise a new round, you issue new shares, and everyone's percentage shrinks. An investor with pro rata rights can buy enough of the new round to hold their percentage steady. Y Combinator defines it as the right, not the obligation, to invest in a future priced round to maintain ownership, and notes that it lives in a standardized side letter rather than in the SAFE. In priced rounds, a similar right usually appears in the investors' rights agreement.
Worked example (hypothetical)
An early angel owns 2% of your company. You raise a $5M Series A. To keep 2%, the angel can invest 2% of the new round: 2% × $5M = $100,000. If they pass, their stake is diluted along with everyone else's.
Questions to settle before you offer it
- Is there a minimum check size to get pro rata?
- Does it cover only the next round, or every future round?
- Can a new lead ask existing investors to scale back if the round is oversubscribed?
- Who on your team tracks these commitments so nothing surprises you later?
Why it matters to a pre-seed founder
Pro rata rights are a common ask from early investors, and they cost you little at pre-seed. Two things to watch. First, a new lead may want a bigger allocation than the round leaves after existing investors take their pro rata, so offering it to every small check can cause friction later. Second, many founders give pro rata only to investors above a set check size. Decide your policy before you start, and put it in writing. See lead investor and term sheet.
Frequently asked questions
Is pro rata a promise to invest?
No. It's an option. The investor can choose to invest in the next round, or not.
Do standard SAFEs include pro rata?
Not in the SAFE itself. Y Combinator offers an optional pro rata side letter alongside its SAFE forms.
Should I give pro rata to every investor?
It's your call. Many founders limit it to investors above a certain check size so later rounds keep room for new investors.