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Full-Ratchet Anti-Dilution

"Nuclear protection that can devastate founders"

Anti-dilution protection that reprices ALL of an investor's shares to match any lower price in future rounds—regardless of how small that future round is.

How It Works

  1. 1

    Investor buys shares at $10/share

  2. 2

    Company later raises ANY money at $8/share (down round)

  3. 3

    Full ratchet: ALL investor shares reprice to $8

  4. 4

    Investor effectively gets free shares to compensate

  5. 5

    Founder and common stock bear 100% of the dilution

Key Mechanics

Triggers on any lower-priced issuance (even small amount)

Weighted-average is the standard alternative

Broad-based vs narrow-based affects severity

Pay-to-play provisions can offset harsh anti-dilution

Regulatory Context

Standard contract provision. NVCA model documents use broad-based weighted average as fair compromise.

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