Anti-Dilution Protection Calculator

Anti-dilution protection adjusts investor's conversion price downward when company raises at lower valuation (down round). Two methods: Full Ratchet (harshest - new round price applies retroactively) and Weighted Average Broad-Based (industry standard - blends old and new prices). Standard term in VC term sheets.

Example: investor bought at 10/share. Company down-rounds at 5/share. Full Ratchet: investor's conversion price drops to 5 (gets 2x more shares). Weighted Average: conversion price adjusts to ~7.50 (gets ~33% more shares - less harsh on founders). Broad-based weighted average is the founder-friendlier term, versus full ratchet.

Why anti-dilution matters: protects investors from paying premium price during good times, getting same dilution as later cheaper investors. Full ratchet very founder-unfriendly - can wipe out founder equity in significant down round. Weighted average more reasonable. Pay-to-Play provisions: investor must participate in down round to keep anti-dilution rights - prevents free-riding. Term sheets commonly specify broad-based weighted average plus pay-to-play.

A worked example

With the defaults: original price per share of 10, original shares held of 100,000, new round price of 5, new shares issued in down round of 200,000. The tool returns 5.00. You can adjust any input and the result updates as you type — no submit button, no reload. That's the real power here: seeing how sensitive the output is to one or two assumptions.

What moves the number most

The result responds to Original Price Per Share, Original Shares Held, New Round Price (Down Round), New Shares Issued in Down Round, and Protection Type (1=Ratchet, 2=Weighted). Not every input has equal weight. Adjusting one input at a time toward extreme values shows which ones move the result most.

The formula behind this

Full Ratchet: conversion price = new round price. Weighted Average: blended formula. Everything the calculator does is shown in the formula box below, so you can check the math against your own spreadsheet if you want.

Why run this

Running the numbers makes the trade-offs concrete. Small changes in the inputs can move the result more than intuition suggests, which is hard to judge without working it out.

What this doesn't capture

This is a simplified model that holds its assumptions constant. Real outcomes vary with market conditions, costs, taxes, and timing, so the figure is best read as one scenario rather than a forecast.