Why pre-emption rights matter to a first-time founder
Every new share issue changes who owns what, and pre-emption rights decide who gets the first chance to buy. If you ignore them, you can promise shares to a new investor that existing shareholders are entitled to take first, which delays the round or forces an awkward waiver. Knowing who holds the right, and on what terms, also tells you whether you can afford to defend your own stake when the company raises again.
Examples of pre-emption rights
You own 60% and the company issues new shares to raise €100,000. With pre-emption, you may buy enough of those shares to stay at 60%, if you have the cash. If you do not buy, your 60% falls. An investor with the same right can protect themselves. A founder who is out of cash often cannot.
Common misunderstanding
People think the right stops dilution. It only offers you the chance to pay to avoid it. They also waive it casually to speed a round, and then discover a new investor took a place they thought was still theirs. A waiver is a decision. Write it down each time.
When to use it
Check the articles of association and any shareholders’ agreement before you offer shares to anyone new, because that is where the right, its time limits and any waiver process are set out. List who holds it and how long they have to respond. If you need a quick round, ask holders to waive in writing early rather than discovering the queue after you have announced the investment.