---
title: "What Is Price Protection?"
term: "Price Protection"
description: "Price protection is anti-dilution protection for preferred investors—adjusting conversion price or issuing extra shares if a later round prices below their entry—to preserve economic value in down rounds."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/price-protection
---

# What Is Price Protection?

> Price protection is anti-dilution protection for preferred investors—adjusting conversion price or issuing extra shares if a later round prices below their entry—to preserve economic value in down rounds.

**Price protection** refers to anti-dilution provisions in preferred stock that adjust investor economics when the company issues shares at a lower price than a prior round.

### How it works

Common forms: broad-based weighted average (standard, moderate founder impact) and full ratchet (rare, severe—reprices earlier investors to the new low price). Triggered by qualified down rounds excluding certain employee grants or strategic issuances per charter language.

When triggered, preferred holders receive additional shares or lower conversion prices, increasing their ownership without new cash. Founders and common holders absorb most dilution unless recap terms negotiate otherwise.

### Why it matters

- **Founders:** Negotiate broad-based weighted average and carve-outs; understand cumulative effect across multiple protected rounds.
- **Investors:** Price protection preserves ownership through setbacks—critical for funds with ownership targets and follow-on reserves.

### Common mistake

Assuming anti-dilution never triggers because "we will never do a down round"—market shocks make protection clauses real, not theoretical.

### Related ideas

See [preferred stock](/glossary/preferred-stock), [down round](/glossary/down-round), and [pay-to-play](/glossary/pay-to-play).

## FAQ

### What is price protection in simple terms?

If the company raises money later at a lower valuation, earlier investors may get additional shares or a lower conversion price so their stake is not wiped out by the down round.

### Why does price protection matter?

It shifts down-round pain between founders and prior investors. Heavy protection can leave common holders heavily diluted when the company struggles.


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Source: https://venturecapitaltracker.com/glossary/price-protection