Pay to Play

Pay to Play is a financing provision that penalizes existing investors who do not participate in a subsequent round (often a down round) by reducing their preferred protections, such as converting some or all of their preferred stock into common. In recap and rescue financings, Pay to Play encourages insiders to support the company, and Pay to Play can materially shift economics between participating and non-participating investors.

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Ryan Roberts Startup Lawyer
Ryan Roberts is a startup lawyer with more than two decades of experience advising on venture financings and M&A transactions totaling more than $1 billion. He is the author of the Amazon bestselling startup law book Acceleration.