---
title: "What Is Weighted Average Anti-Dilution?"
term: "Weighted Average Anti-Dilution"
description: "Weighted average anti-dilution adjusts the conversion price of preferred stock in a down round based on how much new money came in and at what price — a middle ground between full ratchet and no protection."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["deal-terms"]
source: https://venturecapitaltracker.com/glossary/weighted-average-anti-dilution
---

# What Is Weighted Average Anti-Dilution?

> Weighted average anti-dilution adjusts the conversion price of preferred stock in a down round based on how much new money came in and at what price — a middle ground between full ratchet and no protection.

**Weighted average anti-dilution** is the standard down-round protection that recalculates preferred conversion price using how much new capital enters and at what valuation — softer than a full ratchet reset.

### How it works

When new shares issue below prior conversion price, anti-dilution triggers. Weighted average formulas include:

- **Broad-based:** counts all common outstanding (fully diluted, including options) in denominator — founder-friendlier
- **Narrow-based:** excludes some common equivalents — harsher on founders

Classic broad-based formula conceptually:

New conversion price = old conversion price × ((common outstanding + money at old price / old price) ÷ (common outstanding + new shares issued))

Example sketch: Series A at $1.00 conversion; down round at $0.50 with substantial new money. Weighted average might reset conversion to ~$0.85 instead of $0.50 under full ratchet — prior investors gain extra shares on conversion, founders dilute moderately.

Anti-dilution applies on conversion at exit or IPO, not always immediately as new shares — but cap table models must include it before signing down rounds.

### Why it matters

- **Founders:** Negotiate broad-based weighted average in term sheets; avoid full ratchet unless crisis financing. Model pro forma ownership after trigger.
- **Investors:** Protects prior fund marks and ownership in down rounds without destroying founder incentives as aggressively as ratchet.

### Common mistake

Assuming anti-dilution never triggers on flat rounds with heavy structured preferences. Read the definition of "down round" in your charter — some terms trigger on any new preferences with better economics.

### Related ideas

See also full ratchet, [liquidation preference](/glossary/liquidation-preference), and pay-to-play.

## FAQ

### What is weighted average anti-dilution in simple terms?

If you raise a down round, earlier preferred holders get their conversion price lowered — but by a formula that weighs the new round size and price. Bigger down rounds with more new money cause more adjustment than small insider extensions.

### Why does weighted average anti-dilution matter?

For founders, it means less dilution than full ratchet when price drops. For investors, it protects prior rounds from being economically wiped without punishing founders as severely as ratchet resets.


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Source: https://venturecapitaltracker.com/glossary/weighted-average-anti-dilution