Anti-dilution clause and ratchet: who pays for a drop

An anti-dilution clause protects the fund if a later round is priced per share below what it paid. A ratchet adjusts stakes to actual performance. Both can move several points of equity, and the founder is almost always the one who gives them up.

What is an anti-dilution clause?

It is a form of compensation. The fund buys in at a price per share. If the company later raises money at a lower price, the value of its stake falls. The clause makes up for that fall, usually by issuing extra shares or adjusting a conversion ratio.

It does not apply in a round at the same or a higher price. The "normal" dilution of a round at the same price is not compensated.

The trap is the timing: the day the clause triggers, you are already in trouble, since you are raising at a lower price. It hits at the worst moment.

Full ratchet or weighted average?

From the owner's side, the weighted average. A full ratchet resets the fund's price to the new low price, whatever amount is raised. A weighted average takes that amount into account.

A case built for illustration. The founder holds 300,000 shares. A fund has invested €1M at €10 per share, so 100,000 shares. Two years later, a €500,000 rescue round is priced at €5 per share: 100,000 new shares.

For the weighted average, I use the most common broad-based formula: new price = old price × (A + B) ÷ (A + C), where A is the number of shares before the round (400,000), B the number of shares the amount raised would have bought at the old price (50,000) and C the number of shares actually issued (100,000). Result: €10 × 450,000 ÷ 500,000 = €9.

In percentages: the full ratchet costs the founder 10 points, the weighted average 1.3 points. For a €500,000 round.

The calculation is simplified. The new investor may require its stake to be calculated after the anti-dilution adjustment, which pushes even more dilution onto the founder. Look at the full ratchet row: 50.0%. A €500,000 round is enough to bring the founder down to the point where they no longer control the general meeting alone. That is the scenario I have modelled first whenever a term sheet arrives with a full ratchet.

How does a performance ratchet work?

It settles a disagreement on valuation. The owner values the company at €6M, the fund at €4M. They agree on a formula: the fund's stake is calculated on €4M, but if EBITDA hits a target within two years, the owner wins back part of the equity.

Assume an investment of €1M. On a €4M pre-money, the fund holds 1 ÷ 5 = 20%. On €6M, it would hold 1 ÷ 7 = 14.3%. The ratchet is therefore worth 5.7 points, roughly 28% of the fund's stake.

For it to be fair:

• the metric is defined precisely (normalised EBITDA, accounting method);
• the owner keeps the means to reach the target;
• the calculation can be checked by a third party;
• the metric does not depend on a decision the fund takes alone, such as a capital expenditure budget subject to its veto.

That last point is the one I check first. An EBITDA target the fund can hold back through its reserved matters is not a target, it is a free option for the fund.

How can you limit the effect of these clauses?

By negotiating the form before the valuation. An owner who gains €500,000 of pre-money valuation and accepts a full ratchet has often made a bad deal.

These clauses appear in the letter of intent or term sheet: that is where you need to spot them, not in the final agreement. And they weigh directly on the valuation of your SME, since a tough anti-dilution clause amounts to taking back part of the price agreed.

Do Walloon and Brussels investors use these clauses?

I have no published answer. My survey of 15.10.2026 covers nine players (ORSA, Namur Invest, Invest.BW, Sambrinvest, Noshaq, IMBC, Wallonie Entreprendre, finance&invest.brussels, Theodorus): tickets, instruments, areas. Their anti-dilution policy is not part of it. It is not published, and you find it in the term sheet.

The instrument changes the picture. Part of their investments goes through subordinated loans or convertibles: Namur Invest (the Namur provincial invest) publishes a portfolio split roughly 20% equity and 80% debt, and ORSA presents its Smart Bond as a 5 to 10-year subordinated loan with no dilution. A subordinated loan creates no shares: no dilution, so no anti-dilution. A convertible raises the question at conversion. The details are in the guide to the subordinated loan.

The framework is the same in Wallonia, Brussels and Flanders: the clause is a matter of contract, and the Companies and Associations Code (CSA, the federal code governing Belgian companies) governs the issue of new shares. The text is available on ejustice. To compare each player's instruments, the ranking of SME funds reproduces this survey. Have your adviser model the clause before you sign.