so, he thinks you should have to buy pro-rata, and then have the later investors take it away anyway? and then the investor is expected to go to court over it? how long do you think investors that sue their founders will continue to get good deals?
yes, pro-rata is a bit of a pain on up rounds, especially in terms of letting later investors get the ownership they want. but on a down round, previous investors get wiped out very aggressively; they need the protection to be able to at least maintain their stake.
(personally, i will typically go with whatever the founder wants. "it looks bad if you don't take your prorata" or "i can't get enough room for the new investor" and so on. if a new investors adds terms to strip previous investors of their rights, i will insist on it, though.)
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so, he thinks you should have to buy pro-rata, and then have the later investors take it away anyway? and then the investor is expected to go to court over it? how long do you think investors that sue their founders will continue to get good deals?
yes, pro-rata is a bit of a pain on up rounds, especially in terms of letting later investors get the ownership they want. but on a down round, previous investors get wiped out very aggressively; they need the protection to be able to at least maintain their stake.
(personally, i will typically go with whatever the founder wants. "it looks bad if you don't take your prorata" or "i can't get enough room for the new investor" and so on. if a new investors adds terms to strip previous investors of their rights, i will insist on it, though.)