Down Rounds and Anti-Dilution, Explained in One Example
When a startup raises money at a lower price, anti-dilution protection cuts early investors' conversion price so their preferred shares convert into more ordinary shares. In one worked example, a full ratchet doubles the investor's ordinary shares, while broad-based weighted average gives about 5% more. Either way, the extra shares dilute everyone else, founders included.
Illustration with simple numbers. Conditions apply. Not tax advice. Source: NVCA Model Certificate of Incorporation (Oct 2025), section 4.4.4.
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