Anti-Dilution Calculator: Weighted Average and Full Ratchet

What a down round is

A down round is a financing priced below the price per share of an earlier round. If your Series A paid $3.00 a share and the next investors pay $1.50, that round is a down round, whatever it is called. It can follow a valuation that ran ahead of revenue, or a raise that took longer than the runway allowed. In Cooley's Q1 2026 Venture Financing Report, covering 165 financings, down rounds were 11.4% of deals and up rounds 86%.

Every round dilutes existing holders. A down round adds a second layer: protected investors get their conversion price cut, so their preferred converts into more common shares, taken from everyone without protection.

Why anti-dilution exists, and the three methods

Preferred converts into common at original issue price divided by conversion price, 1:1 at issue. Anti-dilution lowers the conversion price after a cheaper issue, which raises the ratio and moves the investor part or all of the way to the new price.

• Broad-based weighted average: the NVCA model charter (s.4.4.4) sets CP2 = CP1 x (A + B) / (A + C). A is the common outstanding before the issue, counting granted options and every preferred series as converted. B is the shares the new money would have bought at the old conversion price (amount raised divided by CP1). C is the shares actually issued. The charter rounds CP2 to the nearest one-hundredth of a cent. It is the market standard: Osler's 2025 Deal Points Report found it was still the norm in Canadian financings in 2025, in up, down and flat rounds alike.
• Narrow-based weighted average: the same formula with a smaller A. Definitions vary by deal; this calculator uses the narrowest one in use, the shares the protected series itself converts into. A smaller A gives a bigger adjustment.
• Full ratchet: the conversion price drops to the new price, however few shares are sold. The NVCA charter includes it as an alternative clause, with an optional end date.

The NVCA formula counts granted options, not the unallocated pool. Some charters count the whole pool, which enlarges A and shrinks the adjustment; the checkbox switches between the two.

Worked example (the default inputs)

An illustrative company has 7,000,000 founder shares, a 1,000,000-share option pool (500,000 granted), a $2M Seed at $1.00 (2,000,000 shares) and a $9M Series A at $3.00 (3,000,000 shares): 13,000,000 shares fully diluted. It raises $6M at $1.50, half the Series A price, a $19.5M pre-money. That issues 4,000,000 new shares.

The Seed paid $1.00, below the new price, so nothing changes for it. For the Series A under broad-based weighted average, A = 7,000,000 + 500,000 + 2,000,000 + 3,000,000 = 12,500,000, B = $6M / $3.00 = 2,000,000 and C = 4,000,000. CP2 = $3.00 x 14.5 / 16.5 = $2.6364. The Series A now converts at 1.1379 to 1, into 3,413,746 shares, 413,746 more than before.

Founders owned 53.85%. The new shares alone take them to 41.18%. Anti-dilution takes them to 40.20%, about one more point. Under narrow-based protection, the Series A conversion price falls to $2.1429 and founders end at 38.46%. Under full ratchet it falls to $1.50, the Series A gets 3,000,000 extra shares, owns 30% instead of 23.08%, and founders end at 35.00%. The price is the same in all three cases; the clause decides who pays for it.

Pay-to-play

A pay-to-play clause makes protection conditional on investing again. In the NVCA model charter, a preferred holder that does not buy its pro rata share of a qualifying round has some or all of its preferred converted into common, losing anti-dilution and its liquidation preference on those shares. Cooley counted pay-to-play provisions in 7.3% of Q1 2026 deals. This calculator does not model it: if an investor would lose protection, set its series to "None".

Before you sign a down round

Run the round with and without protection to see what the clause costs. Check later rounds with the dilution calculator and the cap table calculator, and what the preferences mean at exit with the liquidation preference calculator. The SaaS fundraising guide and the SaaS valuation guide cover the price itself.

The calculator follows the NVCA model charter (October 2025). It assumes each conversion price still equals its original price and that the new price does not depend on the anti-dilution shares. It ignores waivers, exempted issues, warrants, SAFEs and notes converting in the round. It is an estimate, not legal advice: your charter decides the actual adjustment.

Sources: NVCA Model Certificate of Incorporation (October 2025), s.4.1.1, 4.4.1, 4.4.4 and 5A; Yokum Taku, What is weighted average anti-dilution protection? (Startup Company Lawyer); Cooley Q1 2026 Venture Financing Report; Osler 2025 Deal Points Report. Read October 21, 2026.

A down round is easier to avoid when you can see it coming. To track runway, burn and the next raise in one model, try Adlega.