The Anti-Dilution clause is a regular mechanic in most contracts for venture capital fundraising rounds. The Anti-Dilution clause basically protects investors from downrounds. A downround is a financing round on a company valuation that is lower than the valuation of the last financing round. It could be difficult to understand how Anti-Dilution mechanics function. In the following and the linked whitepaper, I’ll provide you with some hopefully easy-to-understand examples for three different types of Anti-Dilution algorithms:

• The “Narrow-Based Weighted-Average” Anti-Dilution
• The “Broad-Based Weighted-Average” Anti-Dilution
• The “Full-Rachet” Anti-Dilution

In case of a downround, investors receive anti-dilution to protect their stake. The exact number of shares depends on the calculation methodology, as shown in the example below.

SERIES A