Deal Terms
Broad-Based Weighted Average
Last updated
Quick Answer
The most common and founder-friendly anti-dilution formula that accounts for the size of the down round relative to total shares outstanding.
What it is
Broad-based weighted average anti-dilution is a formula that adjusts the conversion price of preferred stock in a down round by considering both the new lower price and the number of new shares issued relative to the total capitalization. Unlike narrow-based weighted average (which only counts preferred shares) or full ratchet (which ignores proportionality entirely), the broad-based formula includes all outstanding shares — common, preferred, and option pool — in the calculation.
In Practice
With broad-based weighted average anti-dilution, the Series A conversion price dropped from $10 to $8.50 in the down round — a meaningful but manageable adjustment compared to the $5 it would have been under a full ratchet provision.
Operational context
What good looks like
The term is tied to a real workflow, not just a definition.
Ownership, timing, and evidence are clear.
The reader can tell what decision the concept supports.
Related terms point to the next useful explanation.
Why It Matters
Broad-based weighted average is the market standard and the version founders should insist on. It provides fair downside protection for investors while preventing the devastating dilution that full ratchet can cause to common shareholders.
VC Beast Take
If an investor pushes for narrow-based weighted average or full ratchet, it's usually a sign they're either unsophisticated or overly aggressive. Most institutional VCs default to broad-based weighted average without negotiation.
Term Family
Further Reading
VC Term Sheet Template & Guide: Every Clause Explained with Examples
A clause-by-clause breakdown of every standard VC term sheet provision — what each term means, what's market, what to negotiate, and the red flags that cost founders millions.
Share Dilution Explained: Formula, Examples, and How to Protect Your Equity
The dilution formula every founder needs to know, three worked examples from simple to multi-round, how option pools really work, and practical strategies to protect your ownership stake.
NVCA Model Legal Documents: Every Form a Startup Founder Needs
The NVCA publishes free legal templates that can save you $10-30K in lawyer fees. Here's every document explained in plain English, plus what to watch for.
VC Interview Questions: 30 Questions They'll Actually Ask (With Answers)
30 real VC interview questions organized by category: technical, market thesis, deal evaluation, and behavioral. With frameworks for answering each one.
The Real Cost of Raising Venture Capital (Fees, Dilution, and Hidden Risks)
Most founders think raising $5M means getting $5M. It doesn't. Here's the real math on dilution, legal fees, time costs, and hidden terms that nobody warns you about.
What Is a Term Sheet? Definition, Format, and Sample Template
A term sheet is the foundational document in any VC deal. Learn the definition, format, key sections, and see a sample template to help you negotiate with confidence.
Related Guides
How to Negotiate a VC Term Sheet: A Founder's Leverage Guide
A founder's guide to negotiating VC term sheets: leverage mechanics, which terms actually matter, specific tactics, and real scenarios with concrete playbooks.
How to Read a Term Sheet: Line-by-Line Guide for Founders
Every major term sheet clause decoded: liquidation preference, board composition, anti-dilution, vesting, protective provisions, and more. With a negotiation priority list at the end.
Related Questions
Browse all questions →Frequently Asked Questions
What is Broad-Based Weighted Average in venture capital?
Broad-based weighted average anti-dilution is a formula that adjusts the conversion price of preferred stock in a down round by considering both the new lower price and the number of new shares issued relative to the total capitalization.
Why is Broad-Based Weighted Average important for startups?
Understanding Broad-Based Weighted Average is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
What category does Broad-Based Weighted Average fall under in VC?
Broad-Based Weighted Average falls under the deal-terms category in venture capital. This area covers concepts related to the financial and legal terms that define investment agreements.
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