the.com/anti dilution
the clause that stops your slice of the pie from shrinking when the bakery makes a bigger pie.
means a contract provision protecting investors from having their ownership percentage or share value eaten away by future stock issuances at a lower price.
from emerged from venture capital and corporate finance in the mid-20th century, formalized as startups routinely raised new money rounds that could quietly gut early investors stakes.
two flavorsfull ratchet punishes hard, weighted average punishes gently
down round triggeronly activates when new shares price lower than yours
founders hate itfull ratchet can wipe out founder equity fast
vc standardweighted average is the common negotiated default today
for instance
square 2009 round — early investors got full ratchet protection during a down round
webvan collapse — anti dilution clauses reshuffled ownership before its 2001 bankruptcy
series b down rounds — common in 2022-2023 startup downturn across silicon valley