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Explanation:
Allows current investors to retain their current ownership percentage in future financing rounds.”
Is this right? My understanding was that pro-rata = if an investor owns (say) 20% of a company, then they get to participate with up to 20% of the total of any subsequent financing. This may or may not maintain them at their original 20%.
Hey - made this post to explain the term sheet. Would love any feedback.
“Major investors will have the right to participate on a pro rata basis in subsequent issuances of equity securities Explanation: Allows current investors to retain their current ownership percentage in future financing rounds.” Is this right? My understanding was that pro-rata = if an investor owns (say) 20% of a company, then they get to participate with up to 20% of the total of any subsequent financing. This may…
US$100 "company", with one investor owning 20% (US$20) New round of US$50 and the investor uses pro-rata right of 20% . He takes US$50 * 0.2 = US$10 out of the round. Now owns US$30 worth of equity in the US$150 valued company = 20%
Obviously valuations, various investors, various rounds, convertibles, etc. can complicate matters.
Lastly an investor could also only take part of his 20% right and would then get partially diluted.