Why is Full Ratchet anti-dilution considered toxic for founders?

Full Ratchet reduces the conversion price directly to the down-round price regardless of how few shares are issued, causing massive common equity wipeouts.

Updated: August 2026 • Verified v1.2

Startup Anti-Dilution Down-Round Calculator (Broad-Based & Full Ratchet)

Finance & MathNew

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CP2 = CP1 * (A + B) / (A + C), where A = Pre-round Shares, B = Capital Raised / CP1, C = New Shares Issued

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Understanding Your Results

Provides side-by-side comparison of new conversion prices, effective shares issued, and post-round equity breakdown between founders, early investors, and new down-round investors.

Practical Guidance & Next Steps

Broad-based weighted average is the standard NVCA market protection; Full Ratchet is severe and disproportionately wipes out common stockholders in down rounds.

What is this?

A venture capital financial calculator that models preferred stock conversion price adjustments and equity dilution during down-round financing rounds.

How does it work?

1. Input Series A original share price and capital invested. 2. Input existing share base (common stock, options pool, warrants). 3. Input new down-round share price and capital to be raised. 4. Compare Broad-Based Weighted Average, Narrow-Based, and Full Ratchet outcomes.

Why use it?

Crucial for founders and boards negotiating term sheet anti-dilution provisions and preparing for difficult financing environments.

Technical Scope & Calculation Limitations

Assumes single preferred share class adjustment; multi-tiered series with divergent anti-dilution terms require sequential waterfall modeling.

Frequently Asked Questions

Broad-Based includes all common stock, preferred stock, options, and unissued pool shares in the base (A), diluting the price adjustment. Narrow-Based only counts currently issued preferred shares, resulting in a more aggressive repricing.

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