venture capital funding will remain sluggish until the end of 2022, with no signs of recovery for some time. This means more doom and gloom lie ahead for startups looking to raise money.
Many startups that have tried to avoid a regular round of funding in 2022 or have switched to alternative ways of withholding funding will find themselves in a tight cash position this year and will have to try to raise. I guess.
In the process of securing the necessary funding, investors may need to raise down-rounds. This is to raise at a lower valuation than last time. Or you need to make a deal full of legal terms and structures aimed at providing investors with downside protection.
Many startup founders have no choice as to which deal they want, but some do.
Several investors recently twitter The press said companies would be better off taking down rounds and seeing valuations slashed rather than adding an array of structures and investor preferences to the deal. Although founders only get a lot of options here.
Of course we are not going to offer anything actual Legal advice here, the attention to this recent down round got me thinking. And even if investors are pulling the round down, are there any downsides? We asked some lawyers to get a better idea.
