VC Down-Round Anti-Dilution & Cap Table Engine (Weighted Average

Venture Capital Finance & Term Sheet Architecture: Anti-Dilution Rights

In venture capital financing rounds, anti-dilution protection shields early preferred investors if the company later issues shares at a lower valuation than previous rounds ("Down-Round"):

• The 3 Anti-Dilution Mechanisms:

• Broad-Based Weighted Average (BBWA): The standard institutional NVCA standard. Adjusts the conversion price downward based on both the lower price and the relative size of the new round against the entire fully diluted capitalization.

• Narrow-Based Weighted Average (NBWA): Uses only currently issued common and preferred stock (excluding unexercised employee options pool), resulting in slightly harsher dilution for founders.

• Full Ratchet (Punitive): Instantly resets the previous investor's conversion price all the way down to the new round price), creating massive equity dilution for founders and employees.

• The Pay-to-Play Clause: Many term sheets require existing investors to participate pro-rata in the down-round to maintain their anti-dilution protections; non-participating investors lose their preferred rights and convert to common stock.

How to Use This Calculator

Enter your Pre-Round Fully Diluted Capitalization (A [Shares]) (e.g. 10,000,000 (Common + Preferred + Options Pool)), Series A Original Issue Price / Conversion Price (CP_1 []) (e.g. 5.00 (5.00/share Series A price)), Series A Original Investment Capital () (e.g. 10,000,000 (10M original investment = 2.0M shares)), Series B Down-Round New Share Price (P_2 []) (e.g. 2.50 (2.50/share down-round price)), Series B Down-Round New Capital Raised () (e.g. 5,000,000 (5.0M new capital injection)), Anti-Dilution Protection Provision — choose from options such as Broad-Based Weighted Average (BBWA [NVCA Standard]), Narrow-Based Weighted Average (NBWA), Full Ratchet Anti-Dilution (Severe Investor Penalty), and Founder Common Shares Owned (e.g. 5,000,000 (Founder share count)). Results update instantly as you type — no submit button or page reload required. Adjust any value to compare scenarios side by side.

The Formula

NVCA Venture Capital Anti-Dilution equations:

Broad-Based Weighted Average: CP_2 = CP_1 × [(A + B) / (A + C)]

Where: A = Pre-round fully diluted shares, B = (New Capital Raised) / (CP_1), C = New Shares Issued = (New Capital) / (P_2)

Full Ratchet: CP_2 = P_2

Adjusted Conversion Ratio = (CP_1) / (CP_2)

Adjusted Series A Shares = (Original Investment) / (CP_2)

Post-Money Fully Diluted Shares = A + C + (Adjusted Series A Shares - Original Series A Shares)

Worked Example

For example, a startup with 10,000,000 pre-round fully diluted shares where Series A invested \ (2.0M shares, founders own 5.0M shares [50%]) raises a Series B down-round of \ (2.0M new shares) with Broad-Based Weighted Average protection: . The new Series A conversion price is \ (1.0909:1 conversion ratio). Series A receives +181,818 extra anti-dilution shares (17.91% ownership), while founder ownership compresses from 50.00% to 41.04%.

Understanding Your Result

Evaluate your result against the specific financial decision driving this calculation. Small input differences can create large output swings — run two or three scenarios (conservative, base, optimistic) to understand the range of outcomes. For decisions involving more than a month's income, validate your result against a second source or consult a certified financial planner (CFP) or CPA depending on the tax implications.