Down Round

Raising at a lower valuation than the prior round

What it is

A down round is a financing where a company raises money at a LOWER valuation than its previous round. It usually means the business stumbled or the market turned, and it triggers extra dilution and often anti-dilution protections for earlier investors. The 2022-2023 market produced many of them.

Why it matters

Down rounds are painful and stigmatized: they dilute founders heavily, can demoralize employees (whose options may go underwater), and signal trouble. How the anti-dilution terms are written determines just how much it hurts.

Resources

Investopedia, Down Round

investopedia.com

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