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Overall, it's a solid solution. Some hiccups: - It's common for new investors to ask about pro rata ahead of writing a term sheet (can impact the investment cas
by daniel_levine 6y ago
Overall, it's a solid solution. Some hiccups:
- It's common for new investors to ask about pro rata ahead of writing a term sheet (can impact the investment case/deal).
- Especially in difficult times, new investors might invest under the condition that existing investors do their pro rata.
- sroussey 6y agoSome investors don’t want previous investors to exercise their pro-rata. Depends.
- tyre 6y agoinvestors who act conditionally on other investors are the worst (but still are the majority so you have to account for them) as you said pro-rata can't be after the fact. The company needs to know how much equity it is selling and can't allocate to new investors without knowing what the company has available
- daniel_levine 6y agoAgreed that they're the worst, and agreed that they are an unfortunate reality
- mrkurt 6y agoHopefully YC has enough power to slap firms around if they try and slip a contingency on YC pro rata into a term sheet.
- daniel_levine 6y agoNo firm does, especially in a tricky environment. That's a wild comment to make...
- himlion 6y agoThey could just announce that if such a contingency is used YC will not do the pro rata.