Deal Terms
Anti-Dilution
A contractual protection for investors that adjusts their share price downward if the company raises future capital at a lower valuation.
Anti-dilution provisions protect early investors from the economic impact of a down round. If a startup raises money at a lower price per share than the investor originally paid, anti-dilution clauses adjust (reset) the investor's conversion price, effectively granting them additional shares to compensate. There are two main types: full ratchet (most aggressive — resets to the new low price regardless of how many shares are sold) and weighted average (more common and founder-friendly — adjusts based on both the new price and the number of shares issued at that price). Broad-based weighted average anti-dilution is the market standard in most VC deals.