What is a "Down Round"

In this piece, you learn what a “Down Round” is, its key elements, and its significance. This article is part of a comprehensive series designed to help you navigate the VC world and its terms and concepts. Whether you're an entrepreneur seeking funding, a student learning about the industry or you’re thinking about becoming an investor, this series is your gateway to VC clarity.
January 29, 2024
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What is a "Down Round"

A down round in venture capital refers to a financing round in which a company raises capital at a valuation lower than its previous funding round. In a down round, the company's valuation per share decreases, and existing investors may experience dilution as additional shares are issued at a lower price. Down rounds are often indicative of challenges or changes in the company's performance that lead investors to reassess its value. While down rounds can provide necessary capital, they may also signal concerns among investors and impact the perceived valuation and future fundraising prospects for the company.