Dilution
What is Down Round?
A funding round at a lower valuation than the previous one - triggers anti-dilution protection and often reflects company struggles.
A down round prices the new investment at a pre-money valuation lower than the previous round's post-money. Down rounds trigger anti-dilution clauses on existing preferred stock (typically weighted average), increasing preferred shareholders' effective ownership. Beyond the math, down rounds carry stigma - they signal underperformance to employees, future investors, and customers. They're often paired with restructuring, layoffs, or pivots.