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by Undo Capital
December 15, 2025
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What Is Warrant Coverage?

Warrant coverage is an incentive that gives investors additional warrants, usually expressed as a percentage of their investment, to enhance the overall return of a funding deal.

Warrant Coverage Meaning

The warrant coverage meaning centres on boosting investor upside in early or higher-risk funding rounds. To define warrant coverage in practice, if an investor provides £100,000 with 20% warrant coverage, they also receive warrants giving them the right to buy £20,000 worth of shares at a pre-agreed exercise price. This sweetener compensates for risk, encourages participation and can make debt or equity deals more attractive. A clear warrant coverage definition is essential because it affects dilution, valuation perception and overall deal economics. Warrant coverage stands for enhanced investor incentives linked to future company growth.

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Disclaimer: Our services are designed to assist startups and businesses with company formation, legal agreements, and funding-related documentation. We do not provide investment advice, financial advice, or tax advice, nor are we regulated by the Financial Conduct Authority (FCA). Participating in startups and early-stage enterprises carries inherent risks, including limited liquidity, absence of dividends, potential loss of investment, and dilution. Any decisions regarding investments should be made independently by the investor as part of a well-diversified portfolio.