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Why startup founders shouldn’t avoid downrounds at all costs

Startup founder downround

Every company is feeling a degree of discomfort at the moment, particularly those in their early stages. A dip in tech valuations, mass lay-offs, the cost-of-living crisis and political uncertainty have all led to a pretty unfriendly economic environment for founders growing a business.

Despite these challenging times, it’s important that founders don’t make knee-jerk decisions that may hinder their progress in the long term.

In this market, commanding a premium valuation is going to be a struggle for some companies and that’s an unfortunate reality. But too many VCs and startup founders seem desperate to avoid a downround at all costs.

They would be wise to think again.

In their efforts to swerve the dreaded downround – when a company sells equity at a lower value than previous rounds – founders are agreeing to more exotic and complicated structures....