Definition
A provision requiring existing investors to participate in future funding rounds or lose their special privileges. The venture capital equivalent of 'use it or lose it.'
Example Usage
The pay-to-play clause meant our seed investors had to pony up for Series A or watch their preferred stock convert to common.
Origin
Coined during the 2001 dot-com crash when VCs wanted to separate committed investors from tourists
Fun Fact
Pay-to-play provisions became controversial because they can force smaller investors out, effectively consolidating control among the wealthiest backers.
Source: Venture Capital Association term sheet standards
Related Terms
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See “pay-to-play” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.
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