Down Round
Definition
A funding round conducted at a pre-money valuation lower than the post-money valuation of the most recent prior round. A down round reduces the implied value of existing shares and, where anti-dilution provisions exist, triggers an adjustment to the conversion ratio of preference shares that increases dilution for common shareholders and founders.
Common Misapplication
The most common misapplication is failing to model the anti-dilution adjustments triggered by a down round before agreeing to the down round terms. The full dilutive effect on founders and common shareholders includes both the primary dilution from the new shares issued and the secondary dilution from anti-dilution adjustments on existing preference shares.
FFI Standard Reference
This term is defined and applied in Book 3, Section 3.5: The Liquidation and Exit Mechanics Standard.
Related Terms
Citable URL
This term may be cited using the following permanent URL.
Full citation format: Founder Financial Infrastructure Standard, Beta v0.5, Glossary: Down Round. https://ffistandard.org/glossary/down-round/. 2026.