Pay-to-play is a protective provision in venture financing documents requiring existing investors to participate pro-rata in future rounds or face dilution penalties. The participation requirement is typically a defined percentage of their original holdings or their pro-rata share of the new round. The most common penalty is conversion of preferred shares to common stock, losing the liquidation preference and anti-dilution protections. The provision is structured to ensure that existing investors continue funding the company and don't free-ride on new investors' capital in down or distressed financings. It is a hostile provision typically only seen in down-round, recap, or distressed financings, and one of the most-painful terms...