Delaware law grants no automatic pre-emptive right to buy shares in a company’s next financing. Institutional investors usually negotiate it anyway, through an investor rights agreement covering “major investors” above a share threshold. Founders and employees typically get no such right at all.

The mechanic: a pre-emptive right gives a qualifying investor the option, not the obligation, to buy a proportional slice of a new issuance before it reaches outside buyers. An investor holding 1,000,000 of 10,000,000 shares (10%) can buy 250,000 of a 2,500,000-share issuance (10% of it) to hold the stake at 10%.

Founders negotiating a round decide who gets this option and at what threshold, shaping who has the choice to keep pace with dilution.

Etched, the AI chip startup founded by three Harvard dropouts, closed a $300 million Series C at a $10.3 billion valuation, doubling the $5 billion mark it set in December.

The round was led by Sequoia, with Andreessen Horowitz, SK Hynix, Jane Street, and Diffusion Capital also participating, alongside earlier backers including Peter Thiel and Andrej Karpathy. The company says this is the highest valuation ever for a Sequoia-led Series C, achieved seven months after its prior round and shortly after booking $1 billion in orders for its inference chips.

Founders and employees negotiating equity in the same financing window are now working with a moving valuation baseline: an option grant priced against the December mark and one priced against July’s would carry meaningfully different strike prices for the same company.

Source: TechCrunch