Down Round
A funding round priced at a lower valuation than the company's previous round — generally seen as a signal of reduced investor confidence.
Quick Answer
Why are down rounds particularly hard on founders and employees?
Because anti-dilution provisions typically protect preferred (investor) shareholders from a down round's impact, while common stockholders — usually founders and employees — absorb a disproportionate share of the resulting dilution.
- Anti-dilution clauses shield preferred holders, not common
- Common stockholders absorb a disproportionate dilution hit
- Model the anti-dilution adjustment before assuming impact is shared evenly
The Lovie Advantage
Lovie models a down round's actual impact per share class, showing exactly who absorbs the dilution and by how much.
See how this connects to Bridge Round. For the formal definition, see Investor.gov's glossary entry on bear markets.
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