Both Sides of the Table

JULY 29, 2010

The A round was done in February 2000 (end of the bull market) and my B round was done in April 2001 (bear market). As a result I had to do a down round. Down rounds are psychologically really difficult on companies and can make it harder to do later rounds. I eventually needed more money.

Venture Capital 282

Venture Capital Term Sheet Valuation Stock Options 282

Both Sides of the Table

JUNE 22, 2011

New investors hate down rounds. An obvious example is Google who may have gotten less market attention if there would have been 8 well-financed competitors during the 2001-2005 timeframe. They will enter the “triage phase&# of the market where they figure out which of their existing deals will survive. That’s a fact.

Saudi Arabia 309

Saudi Arabia Valuation IPO Technical Review 309

Both Sides of the Table

SEPTEMBER 18, 2014

You’ll find out the minimum when the next round is raised. And now I have to explain to team that they’re taking more dilution than they expected if we do a down round. A down round? Raising lower seems kind of like something is wrong. Me: More dilution? I thought it was a convertible note with a cap?

Venture Capital 417

Venture Capital Liquidation Preference Valuation Term Sheet 417

Feld Thoughts

APRIL 21, 2016

Also, they have a strong belief that any sign of weakness (such as a down round) will have a catastrophic impact on their culture, hiring process, and ability to retain employees. Their own ego is also a factor – will a down round signal weakness?

Marketing 70

Marketing Down Round Startup IRR 70

Ben's Blog

JULY 16, 2013

3/30/2001: 26.3. When you go to fundraise, you will need to consider the possibility of a valuation lower than the valuation of your last round, i.e., the dreaded down round. Down rounds are bad and hit founders disproportionately hard, but they are not as bad as bankruptcy. Yes, we did a down round.

Down Round 78

Down Round Marketing Preferred Stock Post-Money Valuation 78

Gust

SEPTEMBER 17, 2014

You’ll find out the minimum when the next round is raised. Me: Raising convertible notes as a seed round is one of the biggest disservices our industry has done to entrepreneurs since 2001-2003 when there were “full ratchets” and “multiple liquidation preferences” – the most hostile terms anybody found in term sheets 10 years ago.

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

Both Sides of the Table

SEPTEMBER 27, 2010

I discussed it in my post on the topic linked above. ** One small note: many VCs who got into the industry in 2001 or later have never seen a “carry&# check. If either condition doesn’t hold it will be hard to do anything but a flat or down round.

Liquidity Event 308

Liquidity Event Silicon Valley Seed Stage Finance 308