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
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
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