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  

Robert P. Bartlett III

University of California, Berkeley - School of Law; University of California, Berkeley - Berkeley Center for Law, Business and the Economy

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 III (Contact Author)

University of California, Berkeley - School of Law ( email )

215 Boalt Hall
Berkeley, CA 94720-7200
United States
510-642-6646 (Phone)

University of California, Berkeley - Berkeley Center for Law, Business and the Economy

UC Berkeley School of Law
Berkeley, CA 94720

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