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50 Questions: What is anti-dilution/downround protection?

By on October 20, 2011

Together with Nic Brisbourne of The Equity Kicker / DFJ Esprit, I am writing a series of 50 questions you should ask when raising venture capital. We expect the series to run for a year, after which we will collate the answers into a book. We view this as a collaboration, so please comment to help make this series even more useful. This is #36 in the series.



In his post Key terms in a termsheet Part 2, Nic covered the basics of anti-dilution.  In that post he wrote that there are three flavours of anti-dilution:

  • Full ratchet
  • Narrow-based weighted average
  • Broad-based weighted average

In this post Nic goes into a little more detail on each of the three mechanisms.  In a very thorough explanation, he provides a typical mathematical formula for each type of anti-dilution and a worked example.


To learn more about the three mechanisms behind anti-dilution, go to 50 Questions: What is anti-dilution/downround protection? at the Equity Kicker.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com