Silicon Valley Self Regulation

Pay to Play

photo by Keith Allison

photo by Keith Allison



“Pay to play”, specifically in the tech ecosystem, refers to a sort of provision that effectively punishes investors for not participating up to their full pro-rata percentage. These provisions come in a number of forms, from anti-dilutive formulas in a dilutive financing event to converting preferred stock to common stock if the investor doesn’t fully invest for their pro-rata ownership.

helpful resources

Yoichiro Taku's What is a pay to play provision? at Startup Company Lawyer

Scott Edward Walker's Demystifying the VC term sheet: Pay-to-play provisions at VentureBeat

Connie Loizos's Pay To Play: How Investors Get Burned Fast In A Downturn at TechCrunch