Pay to Play 

Pay to Play is a provision commonly found in venture capital financing agreements that requires existing investors to participate in subsequent funding rounds to maintain certain privileges, such as anti-dilution protections or preferential rights. 

If investors choose not to participate (i.e., they do not “pay to play”), their shares may be converted to a less favorable class of stock, often common stock, losing priority in dividends or liquidation preferences. This mechanism encourages ongoing support from investors and protects a company from passive shareholders during critical funding periods. 

Pay to play provisions ensure committed investor participation, especially in down rounds or when additional capital is urgently needed.