An anti-dilution clause is a provision in an option or a convertible security also known as an "anti-dilution provision." It protects an investor from equity dilution resulting from later issues of stock at a lower price than the investor originally paid. These are common with convertible preferred stock, which is a favored form of venture capital investment.
In venture capital investing in particular, dilution is a concern for preferred shareholders, as a later issue of stock at a price lower than their current shares would dilute their total ownership. Anti-dilution clauses prevent this from occurring by adjusting the conversion price between preferred stock and common stock. These clauses are also known as preemptive rights, subscription privileges or subscription rights.