> It’s reasonable to ask “what percentage does this represent on a fully-diluted basis?”

Not only reasonable, but you really should. If they won't answer it's a bad sign.

I’ve scored deals that can’t be diluted for X years after liquidity event, so employees should be able to as well. Don’t put people down with “you must not know what you’re talking about”.

You’d have to be one hell of a hire to convince anyone to agree to something that will complicate all finance rounds going forward. I cannot imagine the average employee could get away with this.

It’s as easy to imagine as it is to imagine a VC getting this kind of deal. The first employees are the ones who literally build the company and usually take far greater personal risk

I cannot imagine a competent and well-informed founder accepting an investment on these terms. Prorata is fine for larger investors, but explicitly undilutable is idiotic.

VCs can somewhat commonly get pro-rata rights in future rounds. That's quite a bit different from a guarantee of never being diluted.

Pro-rata only usually applies once. The investor has an option to retain their ownership by investing more in the next round, but only that one round. If they use it, it’s gone. If they don’t use it, it’s gone. Then they have to negotiate it again for future rounds and usually you can’t get prorata unless you are the lead investor.

How would they know what fully-diluted would be? Wouldn't there be unknown number of rounds at unknown valuation before liquidity? Or do you just mean based on current expectations. Because, if the latter, how do you hold them to that?

Fully diluted means if all currently issued options, warrants, convertible bonds, etc are converted to shares. It obviously can't account for future financing rounds which aren't even yet contemplated.

Fully diluted is not the same as future diluted, it just means including all the available options currently allocated but not exercised.