Founder answers
Down rounds and anti-dilution, explained
Short answer
Anti-dilution protects earlier investors if you raise a later round at a lower price (a down round) by adjusting their conversion price. Broad-based weighted-average is the standard, founder-friendlier method; full-ratchet is aggressive and resets to the new, lower price.
Broad-based weighted-average (standard)
The protected investor’s conversion price moves down by a weighted average that accounts for how many new shares are issued — a partial, proportionate adjustment. This is the market norm.
Full-ratchet (aggressive)
The conversion price resets all the way to the new, lower price, regardless of how small the down round is — heavily diluting founders and unprotected holders. Push back on it.
Common questions
What triggers anti-dilution?
Issuing new shares at a price below what the protected investor paid — i.e. a down round.
Which anti-dilution is standard?
Broad-based weighted-average; full-ratchet is investor-aggressive.
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