Understanding Price-Based Antidilution Protection: Five Principles to Apply When Negotiating a Down-Round Financing

The Business Lawyer, Vol. 59, November 2003

20 Pages Posted: 14 Jul 2011

Date Written: July 12, 2011

Abstract

This Article provides a practical guide for applying and understanding price-based antidilution protection – one of the principle financial terms negotiated by venture capitalists when making a portfolio company investment. In the process, it highlights some of the often surprising and unintended consequences of standard antidilution formulas in down-round settings, particularly on a company’s new investors. To avoid these results, the Article provides five guiding principles for venture capitalists to apply when negotiating an investment in a company having antidilution protection.

Keywords: Venture Capital, Antidilution Protection, Down Round Financing

Suggested Citation

Bartlett, Robert P., Understanding Price-Based Antidilution Protection: Five Principles to Apply When Negotiating a Down-Round Financing (July 12, 2011). The Business Lawyer, Vol. 59, November 2003, Available at SSRN: https://ssrn.com/abstract=1884420

Robert P. Bartlett (Contact Author)

Stanford Law School

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States

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