Warrants provide investors the right to purchase additional shares of a private company's stock at a preset price within a specified time period. This helps balance the risk of investing in early stage companies with potential future rewards. Warrants are often included in deals where investors purchase debt or preferred stock to induce them to take on the risk of the startup. They allow investors to see how the company performs before deciding if they want to make an additional investment at the original price. Warrants protect investors from share dilution from future equity issues by the company.