Pro Rata Rights, in Plain Terms
A pro rata right is the right to keep your percentage. An investor who owns a tenth of a company may buy a tenth of the next round, and dilution passes by to that extent.
The right matters because conviction compounds. The companies an investor most wants to hold at year six are usually the ones already held at year two, and pro rata is the instrument that lets it stay.
Like any right, it has a cost. Exercising pro rata takes capital, which is why reserves and pro rata rights are two halves of one policy.
Read the clause for its edges: whether it survives later rounds, whether it can be assigned, and what notice the company owes before it lapses.