What is a Down Round? Definition or Meaning

A down round is where investors buy stock from a company at a price lower than what they paid in a previous phase. For a startup, each phase of raising capital, known as rounds generally progressively increase in value as it grows. However, in some instances, investors may ask for a lower price than the previous phase or… a down round.

For example…

Daily deal startup company LivingSocial was once worth over five billion dollars and then dropped in value to a quarter of that. In 2013, LivingSocial was forced to raise money in a down round, which meant they sold seven point five percent of the company for a hundred and ten million dollars. This was well below what would have they would have offered in the past.