Neo drops pro rata rights from its deals and urges other VCs to follow

What's happening? Neo, the San Francisco venture firm and accelerator, says it stopped taking pro rata rights at the start of 2026. When Neo leads a priced equity round, its new standard is that no investor, Neo included, gets pro rata rights. It has also removed perpetual pro rata rights from its standard SAFE side letter and its Neo Residency side letter. Neo says it has already done this on multiple investments and wants it to become the industry default.

Why? In an X Article published on 11 October 2026, Neo investor Connor Ling describes what he calls the paradox of pro rata rights. When founder and investor want to keep working together, the rights don't matter. They only become valuable when exercising them strains the relationship. He adds that they also pit investors against each other: Major Investors can find their rights overridden by larger holders. Neo says it would rather risk losing an allocation than turn a founder relationship into a contractual dispute, and that every fundraise should be a fresh decision about who the best partners are.

The fine print: Neo keeps a limited participation right on very early SAFE investments and in its Residency terms, but only through the first priced round or the next financing. After that, the contractual right ends.

Context: The post explicitly cites the recent dispute between Valar Atomics and its early backer Day One Ventures, which is now in the Delaware courts over pro rata rights in Valar's $1B Series B (see our noteDealroom has a profile for this one. Try Dealroom →). Starcloud co-founder and CEO Philip Johnston called Neo's move smart and said it is in everyone's interest, early investors included, to follow suit.

Source: Connor Ling, "Why Neo Ditched Pro Rata Rights" (X, 11 Oct 2026)