All terms
Fundraising
Down round
A financing round priced below the company's previous valuation. Existing investors' stakes are diluted; anti-dilution protections often trigger.
By Maya Okonkwo · Last updated July 22, 2026
In plain English
You raised at $100M post-money last time, and you're raising at $60M this time. Painful for the cap table, sometimes necessary for survival.
Example
Klarna's 2022 round at ~$6.7B was a down round from its 2021 peak of $45.6B — an ~85% cut. Painful headlines; kept the company alive.
Why it matters
Down rounds are usually treated as a market signal about the company, but they're often a signal about the market. Founders who avoid them at all costs sometimes accept toxic bridge terms that end up worse.
Common mistakes
- Avoiding a down round by taking a 'flat round' with 3x liquidation preference — worse economics than an honest markdown
- Not communicating with existing investors first — surprising them is the fastest way to lose lead-investor support
- Treating anti-dilution as automatic — check the exact ratchet mechanism (full vs weighted-average) before assuming your prior investors get made whole