Anti-dilution
Anti-dilution is a protection measure used in venture capital and startup investments to safeguard early investors' ownership percentage when new investment rounds happen at lower prices. Think of it like insurance for investors - if a company raises money later at a lower price than what earlier investors paid (called a "down round"), anti-dilution provisions help protect the early investors' stake in the company. It's similar to having a special coupon that automatically gives you extra shares if future investors get a better deal than you did. This is a common term that appears in investment agreements and term sheets.
Examples in Resumes
Negotiated anti-dilution provisions for Series A investments across 12 portfolio companies
Structured investment terms including anti-dilution clauses for seed-stage startups
Advised founders on implications of anti-dilution rights in financing rounds
Typical job title: "Venture Capital Associates"
Also try searching for:
Where to Find Venture Capital Associates
Online Communities
Job Boards
Professional Networks
Example Interview Questions
Senior Level Questions
Q: How would you explain anti-dilution protection to a founder who's never raised money before?
Expected Answer: Should be able to explain in simple terms using analogies, discuss different types (full ratchet vs weighted average), and explain the impact on cap tables. Should also demonstrate ability to negotiate these terms.
Q: What factors would you consider when deciding whether to exercise anti-dilution rights in a down round?
Expected Answer: Should discuss relationship management with founders, impact on future fundraising, market conditions, company performance, and strategic considerations for the portfolio.
Mid Level Questions
Q: What's the difference between weighted average and full ratchet anti-dilution?
Expected Answer: Should explain that weighted average considers the size of the down round relative to company's capital, while full ratchet adjusts to the lowest new price regardless of size. Should provide simple examples.
Q: How do anti-dilution provisions affect cap table modeling?
Expected Answer: Should be able to explain how to calculate the impact of anti-dilution on ownership percentages and share prices, and demonstrate understanding of cap table adjustments.
Junior Level Questions
Q: What is anti-dilution protection and why is it important?
Expected Answer: Should explain basic concept of protecting early investors from down rounds, demonstrate understanding of why investors ask for this protection, and basic mechanics of how it works.
Q: Where would you find anti-dilution provisions in investment documents?
Expected Answer: Should know these provisions are typically in term sheets and investment agreements, and be able to identify basic anti-dilution language.
Experience Level Indicators
Junior (0-2 years)
- Understanding of basic term sheet provisions
- Cap table basics
- Financial modeling fundamentals
- Deal documentation review
Mid (2-5 years)
- Term sheet negotiation
- Complex cap table modeling
- Due diligence management
- Deal structuring
Senior (5+ years)
- Leading investment negotiations
- Portfolio company management
- Investment strategy development
- Team leadership and mentoring
Red Flags to Watch For
- Unable to explain basic concepts of equity and dilution
- Lack of understanding of term sheets and investment documents
- No experience with cap table analysis
- Poor grasp of financial modeling
Related Terms
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