Anti-dilution protection is how preferred investors protect themselves in a down round. It raises the number of shares each preferred share converts into, at a cost to founders and common holders. Weighted average is far more common than full ratchet.
What the video says
In venture capital, a startup's price can halve, and one investor gets twice the shares. It's called anti-dilution. Say an investor buys a million shares at ten dollars each. Ten million in. Growth stalls. The next round is priced at five dollars. That's a down round. The strongest clause is called full ratchet. It treats the investor as if they'd paid five dollars all along. So ten million converts into two million shares, not one. They didn't add a cent. Those extra shares dilute the other holders, founders included. Full ratchet is rare. Weighted average is far more common. It softens the blow, but doesn't remove it. So why do investors care? Early investors may be protected. Founders usually aren't. And the terms matter most when things go badly. One side's protection is the other side's dilution.
In the glossary: Anti-dilution
A simple example with round numbers, not advice. Terms vary by fund.
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