1/ Lots of talk from folks about "Down Rounds" in venture but the reality is these are pretty uncommon
Bridge rounds and No Round at All are more common than Down Rounds
But what is pretty common and less discussed "Weak Rounds"
Bridge rounds and No Round at All are more common than Down Rounds
But what is pretty common and less discussed "Weak Rounds"
2/ "Weak Rounds" are rounds at < 2x the price per share of the last round
They get done all the time and much more easily, but the VCs rarely hit the IRR goals from the last round with a raise like this
And they are often very dilutive on top of it
They get done all the time and much more easily, but the VCs rarely hit the IRR goals from the last round with a raise like this
And they are often very dilutive on top of it
3/ A Weak Round or even two, and VCs can end up making half of what they expected, even with the nominal valuation going up
This isn't the end of the world, but bear in mind VCs are looking for the next round to be at least 2x-3x the price per share of the last round
This isn't the end of the world, but bear in mind VCs are looking for the next round to be at least 2x-3x the price per share of the last round
4/ "Weak Rounds" are part of startup life. Progress isn't always as linear as it looks on Twitter
But more discussion should be around avoiding Weak Rounds when possible, less on Down Rounds
Weak Rounds happen all the time, and can impact your cap table as much as "Down Rounds"
But more discussion should be around avoiding Weak Rounds when possible, less on Down Rounds
Weak Rounds happen all the time, and can impact your cap table as much as "Down Rounds"
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