Raising money
Down round
A down round is a funding round priced at a lower company value than the round before it.
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It triggers any anti-dilution terms, clauses that protect earlier investors from a lower price. It describes the price between two rounds only.
New investors get more shares for the same money. Earlier investors with anti-dilution rights get extra shares to make up part of the drop, and those come mostly out of founders' and employees' stakes. Employee options can end up priced above what the shares are now worth. A flat round, at the same price, avoids the label but often comes with tougher terms instead.
This is not legal or tax advice, check with a lawyer or accountant.
What recent Cooley data says
In the 166 venture financings Cooley handled from April to June 2026, 12.1% were down rounds and 4.3% were flat.
- Down rounds and flat rounds among those financings, April to June 2026: 12.1% and 4.3%.
Source: Cooley, Venture Financing Report Q2 2026. 166 financings Cooley handled, not the whole market. As of 5 November 2026.
When this shows up
Example, not a real founder: the best offer for the next round prices the shares below what the last investors paid. A second offer keeps the price flat but adds terms that pay those investors first in a sale. The flat offer reads better, but it can cost more in every later round and at exit.
What to do next
Before you compare offers, list every anti-dilution and preference term your current investors hold. Then work out what each offer would leave the founders owning, terms included.
Go deeper
Participating preferred with a 1x cap, and what it costs you
Each clause it finds explained in plain words, with the ones that may be worth raising with a lawyer pointed out.
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