Berkonomics

OCTOBER 18, 2018

For investors, a subsequent down round at a lower valuation than the last, or an exit opportunity at a loss are all opportunities for the affected stakeholder to show a side that can sometimes shock an entrepreneur or CEO.

Valuation 96

Valuation Dilution Down Round Employee 96

Startup Professionals Musings

JANUARY 27, 2012

Anti-dilution protection. This clause attempts to protect the conversion price of stock of Angel investors, prior to additional financing, from being reduced to a price equal to the price per share paid in a later “down” round. But some dilution is almost inevitable. Right of first refusal.

Term Sheet 223

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 223

Startup Professionals Musings

SEPTEMBER 14, 2010

Anti-dilution protection. This clause attempts to protect the conversion price of stock of angel investors, prior to additional financing, from being reduced to a price equal to the price per share paid in a later “down” round. But some dilution is almost inevitable. Right of first refusal.

Term Sheet 227

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 227

Startup Company Lawyer

MARCH 14, 2010

If new investors get better rights in a future equity financings (such as registration rights, price-based anti-dilution, redemption rights, etc.), Anti-dilution protection. Deleting anti-dilution rights saves several pages of text in the Certificate of Incorporation. Anti-dilution. Future rights. Self-explanatory.

Finance 70

Finance Software Review Term Sheet Liquidation Preference 70

ithacaVC

FEBRUARY 1, 2018

If FFAs only invest at the beginning and do not make any follow on investments as the company raises more $$ then the only real way FFAs make money when the company is ultimately sold is if the company keeps raising future rounds at higher and higher valuations (and IPO exit may provide upside if the stock price increases over time after the IPO).

Preemptive Right 45

Preemptive Right Cap Table Valuation Dilution 45

Gust

OCTOBER 17, 2011

Anti-dilution protection. This clause attempts to protect the conversion price of stock of angel investors, prior to additional financing, from being reduced to a price equal to the price per share paid in a later “down” round. But some dilution is almost inevitable. Right of first refusal.

Term Sheet 158

Term Sheet Pre-Money Valuation Due Diligence Post-Money Valuation 158

The Equity Kicker

MARCH 24, 2015

Everyone loves a high valuation and it’s natural for founders to want to minimise dilution. They will most probably go on to raise multiple rounds of venture capital after all. And don’t forget the prime directive of fundraising strategy: set things up so that you never do a down round.

Valuation 60

Valuation Down Round Dilution Venture Capital 60

The Equity Kicker

JULY 9, 2015

I’ve been here before too, when implementing anti-dilution clauses after down-rounds. And we still have to get all parties to understand and buy into our spreadsheet so it isn’t over yet. It shouldn’t be necessary.

Dilution 60

Dilution Down Round Finance Software 60

Ben's Blog

JULY 16, 2013

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

And now I have to explain to team that they’re taking more dilution than they expected if we do a down round. Me: More dilution? A down round? But people seem pretty focused on that number. Raising lower seems kind of like something is wrong. I thought it was a convertible note with a cap?

Liquidation Preference 153

Liquidation Preference Valuation Term Sheet Stock 153

VC Cafe

FEBRUARY 27, 2024

Carta reports that 20% of the rounds in 2023 were down rounds, but I believe the actual number is much higher. For that and other reasons (like cash preservation) VCs moved to focus more on earlier stage, and many funds that typically invest in A started deploying more into seed rounds.

Valuation 186

Valuation Software Review Generative AI Technical Review 186

Both Sides of the Table

FEBRUARY 8, 2016

Optimize for a W more than % dilution in these circumstances. Don’t assume that you can “just do a down round” if necessary. Down rounds are corrosive. Founders hate them because they’re dilutive. Insiders hate them and fight them. In my mind this simply means.

Burn Rate 150

Burn Rate Cap Table Balance Sheet Dilution 150

This is going to be BIG.

JANUARY 17, 2016

They might have to get another round in, and that round will most certainly be a down round. That means getting out earlier, being more conservative and raising more capital, sometimes meaning more dilution, and taking a VCs fund into consideration.

Dilution 60

Dilution Portfolio China Down Round 60

www.mattbartus.com

DECEMBER 9, 2012

If you are a company that is fundraising, keep in mind that there are a few different levers you can pull to change the amount of dilution that the founders will experience. Let’s say you receive a term sheet for a $1 million investment at a $3 million fully diluted pre-money valuation, and you’re kind of disappointed.

Warrant 40

Warrant Valuation Pre-Money Valuation Term Sheet 40

Berkonomics

OCTOBER 7, 2011

For investors, a subsequent down round at a lower valuation than the last, or an exit opportunity at a loss are all opportunities for the affected stakeholder to show a side that can sometimes shock an entrepreneur or CEO.

Valuation 54

Valuation Dilution Down Round Employee 54

Ben's Blog

JULY 16, 2013

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.

Marketing 46

Marketing Preferred Stock Post-Money Valuation Down Round 46

VC Cafe

JUNE 10, 2022

But recently those round sizes and valuations have tumbled to about $10 million and $50 million, respectively, he said. As a result, founders are accepting increased dilution of the stakes they hold in their own companies. With over 1,000 global unicorns (and about 1.5 As an example, here are 34 new unicorns minted in May 2022.

Valuation 152

Valuation Marketing Venture Capital 152

abovethecrowd.com

APRIL 20, 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? A down round is nothing. Get over it and move on.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

www.paulgraham.com

APRIL 28, 2010

Whatkind of anti-dilution protection do they want? The angel now owns 200/1200 shares, or a sixth of thecompany, and all the previous shareholders percentage ownershipis diluted by a sixth. 10 ]One new thing the company might encounter is a downround , or a funding round at valuation lower than the previousround.

Technical Review 76

Technical Review Startup Software Review Angel Investor 76

Both Sides of the Table

FEBRUARY 14, 2016

Why Down Rounds are Harder Than You May Think. Down rounds are hard. A slight down round is achievable but massive “hair cuts” are very hard to do. Also, new investors will be worried that the down round will cause founders or senior management to depart and no VC wants to replace management.

Valuation 150

Valuation Down Round Startup Later Stage 150

NZ Entrepreneur

JULY 8, 2019

If a valuation is too low, the founders become over-diluted over time and will struggle to do a later series A or B raise if they’re sitting at single digits – global venture capitalists (VCs) won’t touch this scenario. This often carries the double whammy of dilution. Valuations. Taking the smartest possible money.

New Zealand 42

New Zealand Entrepreneur Valuation Dilution 42

This is going to be BIG.

MARCH 3, 2019

If you raise $100mm, you can’t put it all to work upfront because the rounds aren’t big enough—so you have to raise more capital. Dilution becomes the enemy—and you tell your investors that you don’t want to own a smaller and smaller percent of your “best” companies. It doesn’t take into consideration options, down rounds, or recaps.

Portfolio 110

Portfolio Burn Rate LP Distribution 110

Bryce Dot VC

APRIL 21, 2016

It will also minimize future dilution. Paying customers are the only surefire way to avoid future dilution? Perhaps the answer to the Unicorn dilemma isn’t to take the down round or the dirty term sheet. Achieving profitability is the most liberating action a startup can accomplish. Now you make your own decisions.

Silicon Valley 40

Silicon Valley Dilution Term Sheet Down Round 40

Reid Hoffman

JUNE 8, 2021

And I made a decision not to do an equity round, because I thought it would be a down round. And I said, I think it’s going to be a down round, because people are scared. That probably saved a huge amount of dilution, rather than doing a down round at between $15 billion to $18 billion.

Silicon Valley 69

Silicon Valley Hosting Rhode Island Design 69

Both Sides of the Table

MARCH 30, 2016

They had to focus on getting a “W” one day over the short-term dilution impact of raising at a price lower than they had set out to achieve. Luckily we were never a unicorn so we didn’t have to have a destructive massive down-round that makes it harder (but not impossible) to get done.

Balance Sheet 150

Balance Sheet Burn Rate Valuation Forecast 150

A Crowded Space

MAY 31, 2016

We expect there to be an increase in down rounds, flat rounds, inside rounds and various pay-to-play scenarios. The company lives through the cycle, all investors increase their ownership a bit, founders and early employees take some more dilution. This is extremely well summarized in Bill’s Road to Recap post.

Cram Down 60

Cram Down Pay to Play Angel Investor Warrant 60

Reid Hoffman

JUNE 8, 2021

And I made a decision not to do an equity round, because I thought it would be a down round. And I said, I think it’s going to be a down round, because people are scared. That probably saved a huge amount of dilution, rather than doing a down round at between $15 billion to $18 billion.

Silicon Valley 36

Silicon Valley Hosting Rhode Island Design 36

www.quora.com

SEPTEMBER 22, 2011

Unless you are a VC with preferred shares and anti-dilution protection and board control your equity in the company is worthless. Even if your company succeeds, there is absolutely no guarantee your equity will not be wiped out in a down round. Next best is being a company insider with a majority equity stake.

Equity 40

Equity Employee Founder Cofounder 40