A “drag along” right is a contractual arrangement between shareholders of a company, specifying that if shareholders holding a majority interest of a company sell their shares, they can force the remaining shareholders to join them (in other words, to “drag” the minority along). In doing so, the majority shareholders will offer the same incentives … Read more Drag Along Rights
Simple Agreement for Future Equity, also known as SAFEs, is an agreement mainly (but not only) used by founders to raise capital during the early stages of the startup. SAFEs are considered as an alternative to the established convertible note structure. It provides the advantages of convertible debt minus its disadvantage, in order to simplify … Read more Benefits of SAFE for Startup Founders
Meaning of Pro-Rata Participation Rights Pro-rata participation rights, also known as pro-rata investing rights, or preemptive rights, grant existing shareholders or investors in convertible instruments such as SAFE, the right to participate in subsequent fundraising rounds. The right allows them to maintain, and sometimes to increase, their percentage ownership in the entity. The right is … Read more Pro-Rata Participation Rights – What does it mean and what should you pay attention to?
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