Down Round
Private Credit glossary · Portfolio Management, Monitoring & Workouts
Definition
Equity financing at a share price below the previous round.
Down Round in plain English
A down round is when a startup raises new money by selling shares for a lower price than it charged investors last time — meaning the company is now officially worth less than everyone thought. It's the business equivalent of a house that was appraised at $500,000 last year selling for $400,000 today: not fatal, but a clear signal things got tougher. Down rounds sting because earlier investors and employees see the value of their stake shrink, and they can dilute (water down) the founders' ownership. They usually happen when a company grew slower than hoped or the whole market cooled off.
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