Anti-Dilution Protection

Contractual mechanisms that protect existing investors from the dilutive effects of a subsequent financing round at a lower valuation than the round in which they invested. Common forms include full ratchet anti-dilution (which adjusts the conversion price to the new lower price) and weighted average anti-dilution (which adjusts based on the relative size of the new round).

A financing round in which a company raises capital at a lower valuation than its previous round. Down rounds signal reduced confidence in the company's prospects and typically trigger anti-dilution protections that further dilute founders and earlier investors.

A structured process required under GDPR Article 35 to identify, assess, and mitigate privacy risks arising from data processing activities that are likely to result in high risk to individuals. DPIAs are mandatory before deploying new technologies, large-scale profiling, or processing sensitive personal data, and must document the necessity, proportionality, and safeguards of the proposed processing.

Legal safeguards that protect individuals who report illegal, unethical, or dangerous activities within organisations from retaliation, including dismissal, demotion, or harassment. In the EU, the Whistleblower Protection Directive (2019/1937) requires companies with 50+ employees to establish internal reporting channels, while the UK's Public Interest Disclosure Act 1998 provides employment tribunal remedies.

The reduction in existing shareholders' ownership percentage when a company issues new shares, typically during a fundraising round. Dilution is an expected part of growth financing, but founders and early investors monitor it closely to protect their economic interest.

The valuation of a company immediately after a new funding round, calculated as the pre-money valuation plus the capital raised. Post-money valuation determines the ownership percentage that new investors receive for their investment.

The contractual right of existing shareholders to participate in future funding rounds on a pro-rata basis, maintaining their ownership percentage. Pre-emption rights protect early investors from dilution and are a standard provision in shareholders' agreements.

The valuation of a company immediately before a new funding round. Pre-money valuation is negotiated between the company and investors and, combined with the amount raised, determines how much equity is issued to new shareholders.

How does equity dilution work across funding rounds?

Equity dilution occurs when new shares are issued in a funding round, reducing existing shareholders' ownership percentages — though not necessarily the value of their holdings if the company's valuation increases.

How should founders structure and maintain their cap table?

A well-structured cap table tracks all equity ownership, options, convertible instruments, and vesting schedules on a fully diluted basis — founders should maintain it from day one using dedicated software.