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What are 'standard, broad based weighted average anti-dilution rights' in this context?

Surely early investors will be diluted, so what are these peculiar rights referring to?




Good question. The anti-dilution right is an adjustment to the investor's shares that occurs when the company does a down-round. The "broad-based" qualifier is a reference to the most company-friendly version of this because it requires the adjustment to take into account the scale of down-round in terms of dilution. For instance, if you closed a round at $20M post and then sold one share afterwards at $10M post, the adjustment would be negligible. There are other variations of anti-dilution adjustments that would ignore such considerations.

The anti-dilution adjustment is generally not something that applies to ordinary course dilution (like employee option grants).




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