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Retroactive Pay-to-Play Coming to a Venture Theater Near You

Insight Dror Futter Dror Futter · May 10, 2020

Retroactive pay-to-plays are not common in a rising market but are likely to become very common over the next year or two. When inside investors "pass the hat" for the next funding round, those investors unable/unwilling to fund their pro-rata could confront some very harsh consequences. Even for companies that already have pay-to-play clauses in their documents, those provisions may be "rewritten" to benefit the participating investors and/or "penalize" non-participating investors.

The article analyzes the impact of retroactive pay-to-plays on non-participating investors. Also, deals that implement retroactive pay-to-plays raise fiduciary issues for company boards. The article also discusses potential risk mitigation steps.

Read the full article at CrowdFund Insider.


Dror Futter focuses his practice on startup companies and their investors, and has worked with a wide range of technology companies. His fifteen years’ experience as in-house counsel includes positions with Vidyo, Inc., a venture-backed videoconferencing company, and New Venture Partners, a venture fund focused on corporate spinouts. Prior to that, Mr. Futter was Counsel to the CIO of Lucent Technologies, as well as supporting parts of its sourcing organization. Read more about Dror here.

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