Anti-dilution protection adjusts the conversion price of preferred stock if a company raises a future round at a lower valuation (a down round). The two main types are weighted-average (standard, adjusts based on the size of the down round) and full-ratchet (aggressive, converts at the new lower price regardless of round size). Anti-dilution protects investors but increases founder dilution in down-round scenarios.
Weighted average (standard): Adjusts conversion price based on size of down round.
Full ratchet (aggressive): Converts at new lower price regardless of round size. Rare and founder-unfriendly.
Down rounds trigger anti-dilution, giving previous investors more shares and diluting founders further.
Not understanding which type you agreed to; not modeling down round scenarios.
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