anti-dilution clauses

An anti-dilution clause is a provision in an investment agreement that protects investors from their ownership percentage decreasing if the company issues additional shares at a lower price than they originally paid. Essentially, it ensures that early investors’ stake isn’t unfairly diluted by future funding rounds. There are different types, like weighted-average and full-ratchet, which adjust the investor’s share price or number of shares to maintain their relative ownership. This clause helps align investor interests with the company's growth while providing a safeguard against unfavorable financing conditions.