Lightspeed’s Top Fundraiser Joins Firm That Takes Seed Funds’ Pro Rata

For years, deep-pocketed venture firms have partnered with seed investors to get access to startups’ later rounds if their growth takes off. The bigger firms often invest in the seed funds, with a handshake agreement that they’ll get a heads-up if a hot young startup is about to raise again. 

A firm called Megalith, which has kept a low profile until now, is carving a different path to investing in the most promising young startups and compensating the seed funds for their discovery. It is targeting what’s known as the pro rata rights that an investor gets when first investing in a portfolio company, entitling it to invest in future rounds to avoid dilution of its stake. Megalith offers to take the seed funds’ pro rata allocation or other follow-on investments.