Inconsistent market and economic factors can lead to a drop in values and share prices of companies. This in turn leads to some companies having to raise new financing at values lower than what they were valued in previous rounds of financing. This is commonly called a ‘down round ’.

For obvious reasons, down rounds are not good news for existing (previous round) investors – their investments are now less valuable than they were. This is where anti-dilution protection becomes valuable. Anti-dilution clauses are standard in investment documents / shareholders’ agreements