Explainer
Down Round
A funding round at a lower valuation
A round where a company raises money at a lower valuation than its previous one.
A down round happens when new investors value the company at less than the last round did. It often reflects slower growth, a weaker market, or a valuation that had run ahead of the business.
It can be painful. Existing shareholders see the value of their stake mark down, and some investment contracts include protections that give earlier investors extra shares to offset the drop.
A down round is not always a sign of failure. Companies can recover, and some raise money this way to survive a difficult stretch.
Illustrative explainers. Figures in examples are hypothetical.