Down round

A down round is a funding round raised at a lower valuation than the previous one. Instead of the company being worth more than last time, the market or your own metrics have decided it's worth less, and new money comes in at a price that marks everyone down. Down rounds are painful because they dilute existing shareholders harder and can trigger anti-dilution clauses that punish founders most of all. They also bruise morale and signal weakness to customers and recruits. For a lean founder, the lesson sits upstream: a down round is usually the bill for raising too high last time, on a valuation the business couldn't grow into. Avoiding one means raising at a price your next milestone can comfortably justify, keeping enough runway that you never raise from desperation, and treating a hot headline valuation as a liability to live up to rather than a trophy. Sometimes a clean down round still beats running out of cash.