Raising money
Anti-dilution
Anti-dilution terms protect an investor if your company later sells shares at a lower price than they paid, by lowering the price they effectively paid.
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They only switch on in a down round, a round priced lower than the one before. The two common versions, full ratchet and broad-based weighted average, differ a lot in how much extra dilution they push onto founders.
Broad-based weighted average moves the investor's price only part of the way down, based on how much new money comes in and at what price, counted against all shares including options. Full ratchet resets the price all the way to the new, lower price, however small the new round is. The extra shares come mostly out of founders' and employees' stakes.
This is not legal or tax advice, check with a lawyer or accountant.
What recent Wilson Sonsini data says
The mild version is the norm: in the financings Wilson Sonsini worked on in January to June 2026, 98% used broad-based weighted average and 1% used a ratchet.
- Financings with broad-based weighted average and with ratchet anti-dilution, January to June 2026: 98% and 1%.
Source: Wilson Sonsini, The Entrepreneurs Report Q2 2026. Deals Wilson Sonsini worked on, not the whole market. As of 5 November 2026.
When this shows up
Example, not a real founder: two term sheets offer the same price. One carries broad-based weighted average protection, the other full ratchet. After one down round, the second can leave the founders owning far less, even though the price looked the same.
What to do next
Find the anti-dilution clause in each term sheet you hold and write down which version it is, full ratchet or broad-based weighted average.
Go deeper
Participating preferred with a 1x cap, and what it costs you
Each clause it finds explained in plain words, with the ones that may be worth raising with a lawyer pointed out.
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