Deal Terms
Pari Passu
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Quick Answer
Latin for 'equal step' — describes securities or investors treated equally, with no one having priority over others in the same class.
What it is
Pari passu is a Latin term meaning 'on equal footing.' In venture capital, it describes situations where investors in the same financing round are treated equally — same rights, same price, same preferences. All Series A preferred shareholders are pari passu with each other: if one gets a pro-rata right, they all do; if one gets 1x preference, they all do. Pari passu becomes important in complex cap tables with multiple rounds or special classes: if one investor negotiates 'most favored nation' (MFN) rights, they receive the same economic terms as any more favorably treated investors. In debt contexts, pari passu means lenders have equal priority in receiving repayment.
Operational context
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Further Reading
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Liquidation Preference Explained: Participating vs Non-Participating (With Examples)
Liquidation preference determines who gets paid first when your startup sells. The difference between 1x non-participating and 1x participating can cost founders millions. Here's how it works.
How to Learn Venture Capital: The Best Free and Paid Resources in 2025
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What Is a Term Sheet? Definition, Format, and Sample Template
A term sheet is the foundational document in any VC deal. Learn the definition, format, key sections, and see a sample template to help you negotiate with confidence.
Comparisons
Frequently Asked Questions
What is Pari Passu in venture capital?
Pari passu is a Latin term meaning 'on equal footing.' In venture capital, it describes situations where investors in the same financing round are treated equally — same rights, same price, same preferences.
Why is Pari Passu important for startups?
Understanding Pari Passu is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
What category does Pari Passu fall under in VC?
Pari Passu falls under the deal-terms category in venture capital. This area covers concepts related to the financial and legal terms that define investment agreements.
Sources & References
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