20 ms·
On the other hand, it is standard advice in the venture-backed startup world to NEVER give an anti-dilution clause - I've heard the words "never give an anti-di
by btown 12y ago
On the other hand, it is standard advice in the venture-backed startup world to NEVER give an anti-dilution clause - I've heard the words "never give an anti-dilution clause to anyone unless they're God, and even then he'd better be giving you a term sheet worth its weight in gold." Unless you were aware of such a clause, it's unlikely that it's in there. At the end of the day, without a clause like that, the parties with the controlling stake in a company can issue shares to whomever they want - I'm assuming that they're issuing shares to themselves and not to you in order to implement this options-pool extension, and not literally taking away your (vested) common stock - now THAT would be illegal. My understanding is that there are some SEC regulations that prevent them from just distributing shares to a few people, but these are hard to enforce, and you'd need to basically sue your cofounders without a guarantee of success (e.g. what Savarin tried to do at Facebook).
- danielweber 12y agoWithout an anti-dilution clause, early investors can be stomped all over by later investors. NB: I'm not disagreeing with your arguments for why anti-dilution clauses are bad. But minority shareholders are otherwise relying on the trust from the board, which has every incentive to screw them over, so it's a no-win situation.
- nordsieck 12y agoThis is not strictly true. Early investors usually have pro-rata rights.
- MCRed 12y agoI've heard a lot of claims of things being standard advice (not picking on you, just this is commonly used expression) where the thing in question isn't standard, and is actually harmful or detrimental (or more specifically, highly biased in favor of the person handing out the "advice") All of the "advice" I've seen from Venture Capitalists have been self serving rationalizations that almost never are really "standard" terms as much as they would like them to be. For example, in one company I worked with, every employee had an anti-dilution clause. This didn't keep the VCs away.