A First Timers Guide to Down Rounds
Insight Dror Futter · April 27, 2020
Remember that glorious period that seems like a lifetime ago when VC's were competing to fund your venture and offer you the most founder-friendly terms and valuations? Well after a decade of valuations always seeming to climb "up and to the right," the rules have changed. For most companies, their next funding round is likely to be a down round, although in some cases insider-led rounds may be flat avoid write-downs but include other investor-friendly terms.
Based on my experience in the 2001 and 2008 downturns, this article describes steps you should be taking to prepare for down rounds and addresses some of the collateral issues that often arise in their wake.
Dror Futter focuses his practice on startup companies and their investors, and has worked with a wide range of technology companies. His fifteen years’ experience as in-house counsel includes positions with Vidyo, Inc., a venture-backed videoconferencing company, and New Venture Partners, a venture fund focused on corporate spinouts. Prior to that, Mr. Futter was Counsel to the CIO of Lucent Technologies, as well as supporting parts of its sourcing organization. Read more about Dror here.
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