Startup Financing in 2023 – Down Rounds Are They Worth It?
Disclaimer: This post discusses general legal issues, but it does not constitute legal advice in any respect. This post is not a substitute for legal advice and is intended to generate discussion of various issues. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel. Cara Stone, LLP and the author expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this post. The views expressed herein are personal opinion.
Chatter about down rounds has been floating around the startup community as we head into Q4 2023. A down round occurs when a company sells its shares at a lower price in its upcoming round than in the previous rounds. Down rounds can result from changing business valuations, global economic shifts, or venture capital (VC) cycles. For a more detailed definition and explanation, check out the next post in this series – “What is a Down Round?”
To some degree, the term “down round” is a market cyclical term that arises when the economy stalls and VCs feel it is more appropriate to take more. It is typically a round where things don’t go according to plan, and your business valuation is decreasing compared to previous rounds. A down round will likely involve changes to corporate documents and restructuring expectations with new investors.
Follow along with the rest of this series to learn about the ins and outs of down rounds and how they can apply to your business.
Disclaimer: This post discusses general legal issues, but it does not constitute legal advice in any respect. This post is not a substitute for legal advice and is intended to generate discussion of various issues. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel. Cara Stone, LLP and the author expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this post. The views expressed herein are personal opinion.
Chatter about down rounds has been floating around the startup community as we head into Q4 2023. A down round occurs when a company sells its shares at a lower price in its upcoming round than in the previous rounds. Down rounds can result from changing business valuations, global economic shifts, or venture capital (VC) cycles. For a more detailed definition and explanation, check out the next post in this series – “What is a Down Round?”
To some degree, the term “down round” is a market cyclical term that arises when the economy stalls and VCs feel it is more appropriate to take more. It is typically a round where things don’t go according to plan, and your business valuation is decreasing compared to previous rounds. A down round will likely involve changes to corporate documents and restructuring expectations with new investors.
Follow along with the rest of this series to learn about the ins and outs of down rounds and how they can apply to your business.
