What is Anti-Dilution Provision?
Anti-Dilution Provision
An Anti-Dilution Provision is a contract clause that protects early investors from dilution if the startup issues shares at a lower valuation in subsequent rounds.
Why It Matters for Startups
Directly dictates the cap table and dilution structure during fundraising; understanding Anti-Dilution Provision helps founders model equity distributions when structuring rounds for investor rights protection in down rounds.
Detailed Deep Dive
An Anti-Dilution Provision is a contract clause that protects early investors from dilution if the startup issues shares at a lower valuation in subsequent rounds (down rounds).
Frequently Asked Questions
Q:What are the main types of anti-dilution?
Broad-Based Weighted Average (standard, moderate) and Full Ratchet (extreme, dilutes founders heavily).
Q:How does anti-dilution trigger?
During a down round, it adjusts the conversion price of preferred shares, granting the investor additional shares.
Quick Facts
- CategoryFunding
- Key ApplicationInvestor rights protection in down rounds
Coverage Trend12 Weeks
Related Startup Terms
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