Weighted-average anti-dilution conversion price

Broad-based weighted-average anti-dilution, worked on an ILLUSTRATIVE STUD scenario. STUD is pre-seed and not yet incorporated, so the whole cap table here is modeled, anchored to the illustrative $1,000,000 target raise: a seed preferred bought at a $2.00 conversion price into a company with 10,500,000 common-equivalent shares outstanding (10,000,000 founder common held by Dan Schmitz plus 500,000 seed preferred as-converted), followed by a hypothetical dilutive bridge of $750,000 at $1.50 per share (500,000 new shares). The formula: the $750,000 would have bought 375,000 shares at the old $2.00 price, so the adjusted conversion price is 2.00 x (10,500,000 + 375,000) / (10,500,000 + 500,000) = 2.00 x 10,875,000 / 11,000,000 = 1.9773, rounded to $1.98 at 2 decimals. The conversion ratio is 2.00 / 1.98 = 1.010101, so each seed preferred share converts into about 1.0101 common, roughly 10 extra common per 1,000 preferred. The strategic read for STUD: the broad-based denominator counts all 10.5M prior common-equivalents, so a 25 percent price drop moves the seed's conversion price only 1 cent, about a 1 percent ratio shift, which is why STUD would offer weighted-average rather than full-ratchet protection in a seed term sheet: it compensates the earlier investor proportionally without transferring the founder's common wholesale on a small bridge. Per this play's scope, the math is what settles; whether weighted-average is the right clause or the down round is wise is a judgment call outside it.