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PitchBook Analyst Note: Down Rounds, Impacts, and Exit Opportunities

Q3 2022

PitchBook Analyst Note: Down Rounds, Impacts, and Exit Opportunities

September 22, 2022

What do down rounds really mean for companies?

The swift decline of the public markets has left many private startups with extended valuations and no exit opportunities in sight. In such an inhospitable market, many companies will be coming face-to-face with down rounds. But what do down rounds really mean for founders and investors in the long run?

Our latest analyst note dives into the data on post-down round exits, difficult IPO markets and investment returns to determine what’s in store for companies taking down rounds in the current market.

Key takeaways:
 
  • Just 13% of companies raising a down round from 2008 to 2014 were unable to raise a new round or exit immediately after the down valuation investment.
 
  • The majority of down rounds occur at the late stage, where there is ample room to adjust valuations that have grown enormously over the past decade.

Table of contents
Key takeaways 1
Introduction 2
Down round data 2
Research 3
Exits post-down round 5
Conclusion 7