Term Sheet – Anti-Dilution

Traditionally, the anti-dilution provision is used to protect investors in the event a company issues equity at a lower valuation then in previous financing rounds. There are two varieties: weighted average anti-dilution and ratchet based anti-dilution. Anti-dilution provisions are almost always part of a financing, so understanding the nuances and knowing which aspects to negotiate is an important part of the entrepreneur’s toolkit. We advise you not to get hung up in trying to eliminate anti-dilution provisions – rather focus on (a) minimizing their impact and (b) building value in your company after the financing so they don’t ever come into play.


(Full Post: http://www.feld.com/wp/archives/2005/03/term-sheet-anti-dilution.html


Brad Feld

Brad Feld has been an early stage investor and entrepreneur since 1987. He is currently a Managing Director at Foundry Group. Prior to co-founding Foundry Group, he co-founded Mobius Venture Capital and, prior to that, founded Intensity Ventures. Brad is also a co-founder of TechStars.

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Filed Under:
Collection: Funding
Category: Term Sheet Terms