A contractual right allowing an investor to purchase more than its current ownership percentage in a future financing round, beyond a standard pro-rata right.

Definition

Super pro rata rights (sometimes called over-allotment or preferential rights) allow an investor to participate in future financing rounds by purchasing more shares than a standard pro-rata right would allow, letting the investor increase its ownership percentage over time rather than merely maintain it. A standard pro-rata right lets an investor buy enough new shares in a subsequent round to keep its existing ownership percentage from being diluted; a super pro-rata right specifies a multiple (for example, 1.5x or 2x its current ownership) or a fixed target percentage the investor may purchase up to, subject to the round's overall size and other investors' rights.

Why it matters

In MedTech, where a company may raise a modest seed round before pivotal data exist and then a much larger Series A or B once clinical or regulatory milestones de-risk the story, an early investor with conviction often negotiates super pro-rata rights to concentrate more capital into the company at the moment its risk profile most improves, rather than being capped at maintaining its original, smaller percentage.

Common pitfalls

•Assuming super pro-rata rights are automatically honored regardless of round size; term sheets typically cap the right by the round's total allocation and may be subordinated to new lead investors' allocation needs.
•Failing to disclose an existing super pro-rata right to a new lead investor early in negotiations, which can create friction over final round allocation late in the process.
•Confusing super pro-rata rights with a right of first refusal on secondary sales; they govern participation in new primary issuances, not the purchase of existing stockholders' shares.

Sources

SEC Investor.gov: Venture Capital · SEC Investor.gov
NVCA Model Investors' Rights Agreement · NVCA
Silicon Valley Bank - Healthcare Reports · SVB

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Regulatory pathway choice - 510(k) vs PMA, 510(k) vs De Novo, Abbreviated vs Special 510(k).
Quality systems - QSR vs ISO 13485, QMSR vs QSR.
Software classification - SaMD vs SiMD, Locked vs adaptive AI.
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