# What is Down Round? Definition & Technical Mechanics

> **Source:** [SPIDITS AI Startup & Venture Intelligence Glossary](https://spidits.com/startup-glossary)  
> **Category:** Funding  
> **Canonical Citation:** [https://spidits.com/startup-glossary/down-round](https://spidits.com/startup-glossary/down-round)

## Definition
A Down Round occurs when a startup raises a new round of funding at a pre-money valuation that is lower than the post-money valuation of its previous round.

## Architectural Mechanics & Deep Dive
A Down Round occurs when a startup raises a new round of funding at a pre-money valuation that is lower than the post-money valuation of its previous round. Down rounds are generally seen as a negative signal, indicating that the startup failed to hit growth milestones or that market conditions have deteriorated. They result in significant dilution for founders and early investors and often trigger anti-dilution protections, which can further adjust share distributions.

## Industry Applications & Real-World Use Cases
Emergency fundraising under adverse market conditions

## Frequently Asked Questions

### What causes a down round?
Failure to hit operational milestones, high burn rate, macro-economic contractions, or setting an unrealistically high valuation in the previous round.

### What are the consequences of a down round?
Severe dilution for founders/early employees, hit to team morale, negative press signals, and trigger of anti-dilution protections.

## Related Terminology
- [dilution](https://spidits.com/startup-glossary/dilution)
- [cram-down](https://spidits.com/startup-glossary/cram-down)
- [pre-money-valuation](https://spidits.com/startup-glossary/pre-money-valuation)

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*From the SPIDITS AI Knowledge Base (300+ terms indexed). Explore full technical definitions: [https://spidits.com/startup-glossary](https://spidits.com/startup-glossary)*