Weighted Average Anti-dilution

Definition

A moderate anti-dilution clause that factors in both the down round price and the number of new shares issued—less devastating for founders than full ratchet but still painful.

Example Usage

The weighted average anti-dilution meant our 20% stake only diluted to 18% despite a 40% down round.

Origin

Legal/financial provision formalized in venture law during the 1990s.

Fun Fact

Most modern term sheets use weighted average anti-dilution; 'full ratchet' is considered too punitive even by investors.

Source: Venture capital and legal terminology

Related Terms

Intermediate

vest

In startup culture, to gradually earn ownership rights to company equity over time (usually 4 years), ensuring employees don't just grab the cash and run.

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Advanced

full ratchet

The most aggressive anti-dilution protection where early investors' conversion price adjusts to match a down round price, regardless of how small the down round is. Financial punishment for daring to need more money.

🚀 Startup / VC

Intermediate

scaling

The corporate fantasy of growing a business exponentially while somehow maintaining quality, usually uttered right before everything falls apart. It's the process of increasing capacity to handle growth—or in startup speak, the thing you'll figure out later after raising millions in VC funding. In tech, it means making systems handle more users; in reality, it means discovering all the shortcuts you took when building the foundation.

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Intermediate

down-stack

Moving to build or sell products at a lower layer of the technology infrastructure, typically where margins are thinner but the market is larger. Often happens when companies realize their original niche is too small.

🚀 Startup / VC

Intermediate

bootstrap

To launch a startup or project with minimal external funding by leveraging existing resources and sweat equity. The term originates from computing (where an OS loads itself into memory) but has become startup gospel—basically, pulling yourself up by your own bootstraps while investors watch from the sidelines.

🚀 Startup / VC

Beginner

distribution

The return of capital to limited partners when a fund exits an investment, either as cash or occasionally as stock, representing the magical moment when paper gains become real money. The VC equivalent of actually getting your lottery winnings instead of just holding a ticket.

🚀 Startup / VC

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