Key points covered:
- Understanding dilution and the impact on ownership
- Strategic insights to negotiate and structure anti-dilution provisions
- Modeling the range of impacts that anti-dilution provisions have on ownership when conversion of convertible securities occurs at a Series A round
- Mechanisms to actively manage the university’s anti-dilution rights
Universities often utilize anti-dilution provisions to protect their equity interests in early-stage companies. Frequently, this anti-dilution right is structured to be operative until the company raises its initial round of institutional capital, generally through the Series A round.
The venture ecosystem shifted dramatically over the last two years with enduring changes that will continue to impact dealmaking in 2024. As they navigate this challenging environment, early-stage companies are increasingly utilizing convertible instruments, such as SAFEs and convertible notes, to delay determination of valuation until a more favorable fundraising climate emerges.
However, this results in an increasingly complex process when it comes time for conversion of these instruments at a financing round, particularly if there are multiple convertible instruments in play, and can have a significant impact on the ownership stakes of both universities and their faculty founders. The wrong outcome can lead to adverse consequences and potentially jeopardize the successful completion of the financing deal.
Understanding how the university’s anti-dilution rights operate when convertible securities convert in a financing round is essential not only for the university, but also for both entrepreneurs and investors to foster clarity and alignment among all parties. That’s why we’ve tapped Kate Schulhaus, PhD, who manages start-up equity for The Ohio State University’s Office of Innovation and Economic Development, to lead this critical and practical webinar.
During this detailed program, Dr. Schulhaus will delve into the crucial strategy of utilizing anti-dilution provisions as a protective mechanism for preserving the university’s equity interests in start-up companies and provide valuable insights into understanding, negotiating, and managing anti-dilution clauses effectively.
