Pro Rata 

Pro Rata is a Latin term meaning "in proportion." In finance and legal agreements, pro rata rights or calculations refer to the proportional allocation or distribution of shares, obligations, or benefits based on each party’s existing stake or participation level. 

For example: 

• In a funding round, pro rata rights allow an existing investor to maintain their ownership percentage by participating in future fundraising events in proportion to their current shareholding. 

• In revenue or cost-sharing arrangements, expenses or profits might be allocated on a pro rata basis, based on each participant’s contribution or entitlement. 

Formula Example (for ownership maintenance):  Pro Rata Investment = New Funding Round Size × (Investor’s Existing Ownership %) 

Pro rata provisions are crucial for preventing equity dilution and maintaining investor influence in a company.