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Is it unattractive to investors if I have a 51% Anti-Dilution Provision?

What is the investor perspective on non-dilutive equity? I am in a situation where the Founder of the business wants to offer me and other management non-dilutive equity (10% of total outstanding). While that is good for me/other management in the beginning, I am trying to figure Will it act as a deterrent for investors and reduce the valuation of our equity later. Appreciate if someone can offer some perspective here. Thanks!

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While its not 51% in your case, I believe the end result would still be the same – littleadv Nov 18 '12 at 20:25
Thanks. Just looking through this right now. I think the magnitude of the protection makes a difference - with 51%, there is very little headroom for multiple rounds of investment. 10% still leaves a lot more room, no? – AJ Yusuf Nov 20 '12 at 19:33

marked as duplicate by littleadv, Apollo Sinkevicius, Karlson, Christian, Chris Fulmer Nov 30 '12 at 18:20

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How do you expect that to work? If you have 10% of the outstanding shares, what shares would an investor be buying? Does this mean the founder will be selling his shares to new investors, thereby holding the outstanding shares constant. Of course this means he is cashing out. Or do you expect to be given more shares?

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The understanding is that the founder will be getting diluted at first and presumably lower valuation. I will have the option to cash out, but will presumably not want to given the lower valuations. I am new to this; do that make sense? – AJ Yusuf Nov 20 '12 at 19:31
I don't follow how one stockholder, the founder, "will be getting diluted at first". Every share is fungible (ie: equal), if the founders shares are diluted, your shares are diluted. Or am I missing something? – Patrick Moloney Nov 29 '12 at 20:16

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