Down Round
A down round is a financing at a lower valuation than the previous one.
Why It Matters
Beyond the price, it triggers anti-dilution provisions that can sharply reduce founder and employee ownership, and it resets what staff options are worth.
Related Terms
- DilutionDilution is the reduction in an existing holder's percentage ownership when a company issues new shares.
- ValuationValuation is the price placed on a company, derived from what buyers will pay, from its earnings or cash flow, or from comparison with similar businesses.
- Bridge RoundA bridge round is a short financing intended to carry a company to a larger raise or to profitability, often from existing investors.
- Liquidation PreferenceA liquidation preference is an investor's right to be paid first, up to an agreed amount, when a company is sold or wound up, before ordinary shareholders receive anything.
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