Pro-Rata Rights Management

PRO-RATA PHILOSOPHY

Understanding Pro-Rata Rights

PRO-RATA RIGHTS FUNDAMENTALS

WHAT PRO-RATA RIGHTS ARE:
☐ Contractual right to participate in future rounds
☐ Based on current ownership percentage
☐ Allows maintaining ownership stake
☐ Typically granted to "Major Investors"
☐ Defined in investor rights agreements

WHY PRO-RATA MATTERS:
For investors:
☐ Protect ownership from dilution
☐ Maintain influence/control
☐ Double down on winners
☐ Portfolio construction requirement

For founders:
☐ Affects new investor allocation
☐ Signal of investor confidence
☐ Can complicate round logistics
☐ Negotiation leverage

PRO-RATA DYNAMICS:
"Investors who want pro-rata are expressing
confidence. Investors who don't want it are
signaling concern. Both matter."

WHEN PRO-RATA BECOMES COMPLEX:
☐ Hot round = everyone wants pro-rata
☐ Struggling company = no one exercises
☐ Multiple investors want super pro-rata
☐ New lead wants larger allocation
☐ Round size changes mid-process

KEY QUESTIONS TO ADDRESS:
☐ Who has contractual pro-rata rights?
☐ Who will want to exercise?
☐ How much room for new investors?
☐ How to handle over-subscription?
☐ What if key investors want more?

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COMPREHENSIVE PRO-RATA MANAGEMENT

Pro-Rata Calculation Framework

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PRO-RATA RIGHTS ANALYSIS
═══════════════════════════════════════

ROUND PARAMETERS:
─────────────────────────────────────
Round: Series ___
Round Size: $_____M
Pre-money Valuation: $_____M
Post-money Valuation: $_____M
New Shares Issued: _______________

═══════════════════════════════════════
SECTION 1: PRO-RATA RIGHTS MAPPING
═══════════════════════════════════════

INVESTOR 1: _______________
Current shares: _____
Current ownership: ___%
Pro-rata right: ☐ Yes ☐ No
Major investor threshold: ☐ Yes ☐ No
Pro-rata entitlement: $_____M (___% of round)
Historical exercise: ☐ Full ☐ Partial ☐ Passed
Relationship status: ☐ Strong ☐ Good ☐ Distant

INVESTOR 2: _______________
[Repeat structure]

INVESTOR 3: _______________
[Repeat structure]

INVESTOR 4: _______________
[Repeat structure]

═══════════════════════════════════════
SECTION 2: ALLOCATION MODELING
═══════════════════════════════════════

SCENARIO A: ALL EXERCISE FULL PRO-RATA
─────────────────────────────────────
| Investor | Entitlement | Allocated |
|----------|-------------|-----------|
| Inv 1 | $___M | $___M |
| Inv 2 | $___M | $___M |
| Inv 3 | $___M | $___M |
| Total Pro-rata | $___M | (___% of round) |
| Available for new | $___M | (___% of round) |

SCENARIO B: EXPECTED EXERCISE PATTERN
─────────────────────────────────────
| Investor | Entitlement | Expected | Reason |
|----------|-------------|----------|--------|
| Inv 1 | $___M | $___M | |
| Inv 2 | $___M | $___M | |
| Inv 3 | $___M | $___M | |
| Total expected | $___M | |
| Available for new | $___M | |

SCENARIO C: SUPER PRO-RATA REQUESTS
─────────────────────────────────────
| Investor | Entitlement | Requested | Gap |
|----------|-------------|-----------|-----|
| Inv 1 | $___M | $___M | +$___M |
| Inv 2 | $___M | $___M | +$___M |
| Total over-sub | | | $___M |

═══════════════════════════════════════
SECTION 3: ALLOCATION DECISION
═══════════════════════════════════════

ALLOCATION PRINCIPLES:
☐ Honor contractual rights first
☐ Balance existing vs. new investors
☐ Maintain lead investor relationship
☐ Consider signaling implications
☐ Document rationale

FINAL ALLOCATION:
| Investor | Entitlement | Requested | Allocated | Notes |
|----------|-------------|-----------|-----------|-------|
| Existing 1 | $___M | $___M | $___M | |
| Existing 2 | $___M | $___M | $___M | |
| Existing 3 | $___M | $___M | $___M | |
| New Lead | N/A | $___M | $___M | |
| New Follow | N/A | $___M | $___M | |
| **TOTAL** | | $___M | $___M | |

ROUND SIZE: $_____M
Pro-rata allocated: $_____M (___%)
New investor allocated: $_____M (___%)

Pro-Rata Communication Templates

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PRO-RATA NOTIFICATION TEMPLATES
═══════════════════════════════════════

STANDARD PRO-RATA NOTIFICATION:
─────────────────────────────────────
Subject: Series [X] Pro-Rata Opportunity

Hi [Investor Name],

I'm writing to notify you of your pro-rata
participation opportunity in our Series [X].

ROUND DETAILS:
• Round size: $_____M
• Pre-money valuation: $_____M
• Lead investor: [Name]
• Expected close: [Date]

YOUR PRO-RATA RIGHTS:
• Current ownership: ___%
• Pro-rata entitlement: $_____M
• Deadline to confirm: [Date]

PLEASE CONFIRM BY [DATE]:
☐ Full pro-rata: $_____M
☐ Partial participation: $_____ (specify)
☐ Pass this round
☐ Request more allocation (specify): $_____

We'll follow up with documentation once
we have confirmations from all investors.

Looking forward to your continued partnership.

[CEO Name]
─────────────────────────────────────

SUPER PRO-RATA RESPONSE:
─────────────────────────────────────
Subject: Re: Series [X] Allocation Request

Hi [Investor Name],

Thank you for your interest in participating
above your pro-rata in our Series [X].

YOUR REQUEST:
☐ Pro-rata entitlement: $_____M
☐ Requested amount: $_____M
☐ Additional ask: $_____M

ALLOCATION DECISION:
Given the round dynamics and need to
accommodate our new lead investor, we're
able to offer you: $_____M

This represents [X]% of your request. We
hope you understand the constraints.

Please confirm acceptance by [date].

[CEO Name]
─────────────────────────────────────

Pro-Rata Tracker Dashboard

Investor	Rights	Entitlement	Intent	Confirmed	Allocated	Gap	Status
	☐ Yes ☐ No	$___M	Full/Partial/Pass/Super	☐	$___M	$___M
	☐ Yes ☐ No	$___M	Full/Partial/Pass/Super	☐	$___M	$___M
	☐ Yes ☐ No	$___M	Full/Partial/Pass/Super	☐	$___M	$___M
New Lead	N/A	N/A	N/A	☐	$___M	N/A
Total		$___M			$___M

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