Angel wants to invest $100K via SAFE. She's asking for pro-rata rights - the right to invest in future rounds to maintain her ownership percentage.
My lawyer said this is becoming more common but I should push back. Is this a big deal or am I overthinking?
for $100K it's not a huge deal. pro-rata just means she gets the OPTION to invest more later. she can't force you to take her money. main issue is if you have 20 angels all with pro-rata, then your Series A lead might get annoyed trying to fill their allocation.
as an angel: pro-rata is basically the whole point for us. we want to double down on winners. if I put in $100K at seed and you 10x, I want to put more in at Series A, not watch my stake get diluted
Here's the nuance: YC's standard SAFE doesn't include pro-rata. If your angel wants it, she's asking for a side letter. That's not unreasonable for $100K.
The risk is if you give it to everyone. 5 angels with pro-rata = fine. 20 angels with pro-rata = messy cap table situation later. I usually recommend: give pro-rata to angels putting in $50K+ but not smaller checks.
real talk: most angels with pro-rata don't actually exercise it. they either don't have the cash for a bigger follow-on or they lose interest. I gave pro-rata to 8 angels, only 2 participated in the next round. It's mostly psychological comfort for them.
She's my only angel right now. No plans for a big syndicate. Sounds like I should just give it?
if she's your only investor and she's putting in $100K, yes just give her the pro-rata. don't lose a deal over it. you can always negotiate allocation limits with your Series A lead later - they're used to this
Agree with Kate. Pick your battles. Pro-rata for a single $100K angel is not the hill to die on. Save your negotiating capital for things that actually matter - board seats, control provisions, etc.
Done deal. Gave her pro-rata with a side letter. She seemed genuinely grateful that I didn't push back. Good start to the relationship. Thanks all!