Pro rata calculations are also used to determine the amount of interest earned on an investment. When an investment earns an annual interest rate, the proportional amount earned for a shorter period is calculated by deriding the total amount of interest by the number of months in one year and multiplying by the number of months during the shortened period. The amount of interest collected in two months for an investment giving 10% interest per year is (10% / 12) x 2 – 1.67%. With the percentage, the SAFE investor gets Safe Preferred Stock when equity financing occurs (this is defined in the SAFE document). So the longest answer is: sometimes they take it, sometimes they don`t. And sometimes they take part of their pro-rata right. The other reason that is worth being aware of, when dealing with your investors, is that sometimes early investors prefer lower prices (say $8 million) and if the markets are effective, if your company says its next round of $50 million, previous investors might think they are less likely to return on $10 million in financing, where they advance in $2 million to $50 million that they make a return on their previous capital. This allows you to get the property%. So if they receive 1 million shares and the capitalization is 10m, they own 10%.

This is the share they can keep in the series-a (note that in the old pre-money tickets, the stock display is only applied in the next round of financing, not in the round where they were converted. In the past, it was difficult for sponsors to determine whether it was worth investing in a particular venture capital fund. Thanks to the explosion of seed funds in modern times and the value of pro-rata rights, sponsors can now find advantageous investments in different sectors. 7. The pro-rata fight between roundsThe story did not matter to entrepreneurs. At each turn, there was the „financing dance“ between early investors. As a general rule, it was subsequent investors who forced previous investors to write cheques to prove that the new investor was not sucked in at a higher price. But today, with a lot of „mega-funds“ ($600 million – $1 billion), they often care more about writing a big cheque and receiving large property shares than proving that the investor is confident in the previous phase. If they trust their due diligence process, why worry about something stupid called „signaling“? Why would someone transfer their pro-rata rights? First of all, some funds are small and so, while they put 750k into a business to own 10% of the business, they might not be able to write an additional $2 million if the company then had a $20 million (10%) spin. I don`t do it. Or an A-Round investor, who wrote $5 million for 25% of a business, may not be well positioned for an additional $5 million (25%) to write.

A $20 million round. Their strategy could be to invest 25 companies per fund, for a total of $3 million to $7 million, which means that $10 million in a deal could be more risky than they would normally want.