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Also known as: down round financing

Down Round

ConceptualFundraising

Definition

Down Round: A down round is a financing round where the company raises capital at a lower valuation than the previous round. This results in significant dilution for existing shareholders and often triggers anti-dilution provisions. Down rounds can damage company morale and signal trouble to the market.

Example Usage

“After missing growth targets, they raised a down round at $50M valuation, half of their Series B.”

Common Misconceptions

Down rounds mean failure. Many successful companies have had down rounds during market corrections.
Down rounds are avoidable with good performance. Market conditions can force down rounds.
Existing investors lose money in down rounds. They may actually increase ownership through anti-dilution.

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