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> And a downround is totally out of question.

Why? Especially because this is the foundation of your entire argument.




While each funding round typically results in the dilution of ownership percentages for existing investors, the need to sell a higher number of shares to meet financing requirements in a down round increases the dilutive effect. Due to the potential for drastically lower ownership percentages, raising capital in a down round is often a company’s last resort, but the new funding may represent the company’s only chance of staying in business.

Read more: Down Round https://www.investopedia.com/terms/d/downround.asp#ixzz5U48D... Follow us: Investopedia on Facebook


Not good enough.

If you would have been happy selling shares at X valuation, if only that high-valuation deal had never happened, then the level of dilution is acceptable to you.

"This down round is bad because it's undervaluing and over-diluting" is an easy to understand argument.

"This down round is bad because a previous round overvalued the company, even though the down round is the correct valuation and the correct dilution" is an argument that needs more justification.

If the valuation is flat-out too low, then the fact that it would be a down round has nothing to do with the problem. A too-low valuation is a problem even if it's higher than your last valuation.




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