Anti-Dilution Provision
Definition
An anti-dilution provision protects investors if a company later issues shares at a lower price, by adjusting the earlier investors’ conversion price downward. The two main types are weighted average (standard) and full ratchet (aggressive).
How it comes up in fundraising
Nearly every priced venture round includes broad-based weighted average anti-dilution; full ratchet terms are a red flag founders should negotiate away.
Frequently asked questions
What is the difference between weighted average and full ratchet?
Weighted average adjusts the price partially based on the size of the down round; full ratchet resets it entirely to the new lower price, hitting founders much harder.
When does anti-dilution trigger?
Only in a down round, when new shares are issued below the price earlier investors paid.
Related terms
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