18. Hacker Inc., a software developer, is considering a financing deal with an investor. The investor and Hacker have agreed on a $2 million investment for 2 million shares of the company. The post-money valuation is $10 million. Hacker has developed promising gaming software to use with popular game consoles, but has been stymied by the closed architecture of the most popular consoles. If the architecture opens up and interest in the software takes off, Hacker will need considerably more money to continue its line of software.
    1. Design a ratchet provision, to include in the investment agreement, which will protect the investor against dilution in subsequent rounds of financing.
    2. Why would Hackers entrepreneurs agree to the provision?
    3. What are the costs, direct and indirect of such an antidilution provision? Explain.