Anti-dilution Provision

Definition

A contractual protection for investors ensuring their ownership percentage doesn't decrease too much if you raise money at a lower valuation—basically punishing you for underwhelming growth.

Example Usage

The weighted average anti-dilution clause protected investors' ownership but diluted our stake by an additional 5%.

Origin

Corporate law provision dating to equity financing structures in the 1970s.

Fun Fact

'Full ratchet' anti-dilution (the harshest for founders) is rare in modern deals; 'weighted average' is the new standard.

Source: Venture capital and legal terminology

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