Down round
A round priced below the valuation of the previous round.
Why it matters
Painful but survivable, and far better than running out of money. The real damage is usually structural: anti-dilution provisions from earlier rounds trigger here, which is exactly why those clauses matter when you sign them.
A worked example
A company that raised at a $60M post-money raises its next round at $35M. Earlier investors with weighted-average anti-dilution receive additional shares, diluting founders further on top of the new money.
What is typical
Broad-based weighted average anti-dilution is the normal protection. A full ratchet, which reprices earlier shares all the way down, is severe and worth resisting.
Related terms
Anti-dilution
Protection that adjusts an investor's effective share price if the company later raises at a lower valuation.
Read more →Bridge round
Interim financing between priced rounds, usually intended to reach a milestone that unlocks the next round.
Read more →Run your raise on this
VCTerminal models these terms on your real cap table, so you can see what a term sheet pays you before you sign it.
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