A funding round where the pre-money valuation is lower than the post-money valuation of the previous round.
Why it matters: Down rounds cause massive dilution for founders and early employees, often triggering anti-dilution protections for previous investors. It heavily impacts company morale.
In practice: A startup raised at a $50M valuation in 2021. In 2023, they run out of cash and are forced to raise at a $20M valuation to survive.