Unpopular take, but whatever: If you've granted pro rata rights, honor your pro rata rights. If you don't intend to honor them, don't offer them in the first place.
I really empathize with the founder. Tough position to be in but increasingly a common one many of my founders have faced too. It’s usually the least helpful investor that fights the hardest for pro rata they haven’t earned.
But ultimately, this situation happens when founders are trying to preserve their own dilution in the face of a new investor coming in and these days those new parties want more and more.
But read it this way: an early investor took a chance on you when you were nothing. And now, to preserve ownership targets of new investors and protect yourself, you're disadvantaging someone who has been with you longer.
Those rights are designed to protect ownership for existing investors even though we all know we have to wave some portion of our pro rata eventually.
Next time just don’t offer pro rata. But you did. So you should honor it.
I really empathize with the founder. Tough position to be in but increasingly a common one many of my founders have faced too. It’s usually the least helpful investor that fights the hardest for pro rata they haven’t earned.
But ultimately, this situation happens when founders are trying to preserve their own dilution in the face of a new investor coming in and these days those new parties want more and more.
But read it this way: an early investor took a chance on you when you were nothing. And now, to preserve ownership targets of new investors and protect yourself, you're disadvantaging someone who has been with you longer.
Those rights are designed to protect ownership for existing investors even though we all know we have to wave some portion of our pro rata eventually.
Next time just don’t offer pro rata. But you did. So you should honor it.
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