anti-dilution provisions

Definition

Protective clauses that let early investors maintain their ownership percentage when future rounds price lower, punishing founders for failing to maintain perpetual hockey stick growth. Comes in weighted-average and full-ratchet flavors of pain.

Example Usage

Our Series A investors have anti-dilution provisions, so the down round means I went from owning 30% to owning enough for a nice dinner.

Origin

Corporate finance mechanism formalized in venture capital during the 1980s

Fun Fact

Full-ratchet anti-dilution is so punishing that most lawyers advise against it, yet desperate founders still agree to it when capital is scarce.

Source: Venture capital term sheet provisions

Related Terms

Advanced

fund velocity

The speed at which a venture fund moves through its investment cycle, from raising capital to deploying it to returning capital to LPs. Faster isn't always better—ask anyone who inhaled their food and got heartburn.

🚀 Startup / VC

Intermediate

Exit Strategy

The plan for how founders and investors will eventually cash out, ranging from IPO to acquisition to quietly shutting down and pretending it never happened. It's planning your escape route before you've even built the building.

🚀 Startup / VC

Advanced

carry

Short for 'carried interest'—the percentage of fund profits that goes to VCs as performance compensation, typically 20%. It's why venture capitalists drive Teslas even when most of their portfolio is worthless.

🚀 Startup / VC

Intermediate

revenue multiple

A valuation metric calculated by dividing company valuation by annual revenue, popular in tech because it works even when profits are mythical. Allows investors to justify astronomical valuations by citing "industry standards."

🚀 Startup / VC

Beginner

Runway

The amount of time a startup has before it runs out of money and crashes, much like an actual runway but with more crying. It's measured in months and discussed in board meetings with the same energy as a doctor delivering a terminal diagnosis.

🚀 Startup / VC

Advanced

claw-back

A provision allowing limited partners to reclaim previously distributed carried interest from GPs if later losses reduce overall fund returns. The nightmare scenario keeping fund managers up at night.

🚀 Startup / VC

Translate This Term

See “anti-dilution provisions” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.

Try the Translator

Share This Term

Post on X Share on Facebook Share on LinkedIn

Discover a Term

Beginner

wybmv

will you be my valentine...