Pre-money Valuation - Upround and Downround

Upround and Downround

Upround and downround are two terms associated with pre- and post-money valuations. If pre-money valuation of the upcoming round is higher than the post-money valuation of the last round, the investment is called an upround. If the reverse is the case, then the investment is called a downround. In the above example, Round B was an upround investment, for pre-money B ($80 million) was higher than was post-money A ($60 million).

A successful company usually has a series of uprounds until it is IPO-ed, sold, or merged. Downrounds are painful events for initial shareholders and founders, for they cause substantial ownership dilution and may damage the company's reputation. However, downrounds were common during the dot-com crash of 2000–2001.