European venture capital has been recalibrating for two years. The valuations from 2021 and 2022 do not always hold, and plenty of good Belgian companies are now looking at a flat or lower round. Even the broader European rebound of Q1 2026 does not fix this: France and Benelux was the only major region where median pre-money valuations declined year on year, down 29,7%. A down round is not a failure. It is a financing decision. The real damage rarely comes from the new lower valuation itself. It comes from a clause you signed in an easier round and never modelled: the anti-dilution ratchet.

What anti-dilution actually does, and who it protects

Anti-dilution is an investor protection clause. It activates when a new round is priced below the previous round. It repositions earlier investor shares so their effective purchase price aligns, wholly or partially, with the new lower price. It is not there to protect founders. It is there to protect the fund that paid €1,20 per share when the new round is being priced at €0,60.

Two structures dominate in Belgian term sheets.

Full ratchet. The old investor price gets reset all the way down to the new round price. If Series A paid €1,20 per share and Series B is at €0,60, Series A shares are treated as if they had been bought at €0,60. The Series A investor keeps the same money invested but ends up with double the shares.

Broad based weighted average. The old investor price gets reset partially, through a formula that accounts for how many shares are outstanding and how much new money comes in at the lower price. The adjustment is much smaller. Instead of resetting €1,20 to €0,60, the formula might land around €0,96.

The difference between these two clauses is the entire story. Full ratchet is punishing. Weighted average is a compromise. Narrow based weighted average sits between them and is rare in Belgian mid market fundraising.

The math founders miss

A worked example on a simple Belgian cap table.

Starting point after Series A

• Founders: 60% (6 million shares)
• ESOP: 15% (1,5 million shares)
• Series A investors: 25% (2,5 million shares) at €1,20 per share, €3 million invested
• Total: 10 million shares

Series B down round

• Company raises €4 million at €0,60 per share, a 50% price cut from Series A
• 6,67 million new shares issued to Series B

Three scenarios for the same round, same money in the door.

Scenario 1, no anti-dilution. All existing shareholders dilute proportionally. Post round, Series B holds 40%, Series A drops from 25% to 15%, founders drop from 60% to 36%, and the ESOP moves from 15% to 9%. Everyone shares the pain of the lower valuation. This is what a symmetric down round looks like.

Scenario 2, broad based weighted average. The Series A conversion price adjusts from €1,20 to €0,96 through the formula. Series A picks up 0,625 million additional shares at no additional cost. Post round, Series A holds 18%, founders 35%, ESOP 9%, Series B 39%. Series A is partially shielded. That protection is paid for by every other stakeholder, in small increments.

Scenario 3, full ratchet. The Series A conversion price resets fully to €0,60. Series A share count doubles from 2,5 million to 5 million for the same €3 million originally invested. Post round, Series A holds 26,1%, founders 31,3%, ESOP 7,8%, Series B 34,8%.

Most founders read that number and assume there is a mistake. Series A had 25% before the round. It should stay at 25%, or drop, not climb to 26%. The intuition is wrong, and it is exactly the intuition the ratchet exploits. The clause does not target a percentage. It targets a price. It gives Series A the right to be treated as if they had paid the new lower price all along. When the price is cut in half, the share count doubles mechanically, and the resulting percentage lands wherever the math takes it. In this cap table, that math produces slightly more shares than needed to preserve 25%, so Series A ends up above their pre-round position, despite a company now worth half of what it was.

Everyone else pays for that inversion. Between no anti-dilution and full ratchet, founder ownership drops from 36% to 31%, the ESOP shrinks from 9% to 8%, and even the new Series B investor takes a hit, from 40% to 35%. That five point founder gap does not vanish. On a company that eventually exits at €100 million, it is €5 million that flows to Series A rather than to the people who built the business. This is the price of a clause negotiated three years earlier, when the last round was easy and no one modelled the downside.

The levers you still hold

Anti-dilution is contractual, but it is not the last word. Several levers can soften the impact of a down round when you get there.

Pay to play. If your shareholders agreement includes pay to play, existing investors must participate pro rata in the down round to keep their anti-dilution protection. Those who sit out lose their preferred rights, and in some drafts their preferred shares convert to common. This is one of the strongest founder friendly clauses in the term sheet library. It aligns incentives at the exact moment they matter most.

Renegotiating the conversion mechanics live. Even when anti-dilution is written, the conversion mechanics can be renegotiated in the down round itself. Existing investors sitting on a fund that needs the company to survive have reasons to soften a full ratchet. Founders who arrive with modelled scenarios negotiate outcomes that do not appear in the original clause.

A bridge before a priced round. A convertible note or SAFE with a fair discount and no valuation cap can extend runway without triggering anti-dilution immediately. The conversion mechanics get set later, ideally once the market has firmed up.

Option pool timing. Whether the ESOP top up is applied pre-money or post-money shifts dilution significantly. Pre-money dilutes founders. Post-money dilutes everyone including the new investor. This is separate from anti-dilution but interacts with it. See our piece on share dilution for how these mechanics combine.

Fix it in the next term sheet, not the next crisis

The clause that hurts you most in a down round is the one you signed when the last round was easy. Anti-dilution is negotiated in the good round, not the bad one.

Broad based weighted average should be the default founder ask. Pay to play should be the second. See our term sheet clauses piece for how these fit into a full negotiation.

If you sign a full ratchet today because the round is going well and you want to close, you are pricing an option against yourself. When a lower round eventually arrives, that option gets exercised, and it is your equity that pays for it.

The Dups approach

At Dups, we model the down round before you walk into the room, so you know exactly what each clause costs you in shares and in control. We sit on your side of the table and negotiate the conversion mechanics, not just the headline valuation, because that is where founder ownership is won or lost. Facing a flat or lower round? Let us model it with you before you sign. Reach ou team at hello@dups.be