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The Tech Entrepreneur's Survival Guide: How to Bootstrap Your Startup, Lead Through Tough Times, and Cash In for Success by Bernd Schoner

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CHAPTER 9

Raising a Down-Round

Much good work is lost for lack of a little more.

—EDWARD H. HARRIMAN (1848–1909)

If you are raising money at a pre-money valuation below the post-money valuation of the last funding event, you’ve got yourself a down-round. To state it differently, your new investors are paying less per share of stock than your previous investors paid (Figure 9.1). After ThingMagic’s spectacular A-round valuation, our stock price decreased in every single follow-up financing event. We clearly had overestimated the prospects of our company and our industry, but so had all the other stakeholders including the investors, analysts, ...

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