Facebook Airbnb and Ramp All Did Down Rounds

Most startups dread this - but Facebook, Airbnb, and Ramp all did it.

The down round.

Upfront: these suck, no doubt.

Having the valuation fall from the prior round has all sorts of implications. It may mean some negative press headlines. It could create uncomfortable conversations with investors, both current and future. And it definitely requires awkward and challenging discussions with employees.

BUT - down rounds are not death knells.

Great companies in the past have taken a valuation decline and come out the other side better for it.

Look at the data below. In the past few years, ~20% or so of all rounds completed by startups on Carta were down rounds (mostly because we way overvalued companies in the 2021 boom).

Just last year, nearly 40% (!) of Series D fundraises were down rounds.

While challenging, it is often preferable to take a down round that resets the cap table as opposed to raising capital at a flat valuation but with many strings attached. Strings like high liquidation preferences or participating preferred stock. Strings like cumulative dividend clauses. Things that can eat away at the potential value of an exit for participants like founders and employees.

No one wants to take a down round — and no founder should be excited about one. But they are a fairly common part of the venture journey and they don't have to be the start of an end.

Keep building!