Venture Hacks

How to make money with pro rata rights:

1. Exercise the pro rata, no matter the valuation, as long as the company is underpriced. Heuristically: a smart VC is leading an up round in the company.
2. Lead an inside round so you can buy more than just your pro rata.
3. Get a supra pro rata. Alternatively: convince the company to cut out other investors who have pro rata rights, so you can buy more than just your pro rata.
4. Sell the pro rata right.
5. Buy so much of the company in the first round, at such a low price, that you don’t need a pro rata. This probably isn’t realistic, but incubator investments are a little like this.