A down round is a fundraising in which new shares are issued at a price below the previous round's valuation — reflecting a decline in company value between consecutive financings. It activates anti-dilution mechanisms (weighted average or full ratchet) for prior investors, creating additional dilution for founders and ordinary shareholders. It may also trigger pay-to-play clauses. While perceived negatively (signal of difficulty), a down round is sometimes the only option for a cash-constrained company seeking to preserve continuity until conditions improve.

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Example: a startup that raised Series A at CHF 200/share (CHF 20.0 million post-money) completes a down round at CHF 80/share (CHF 12.0 million post-money) to fund operations. Series A investors' weighted average anti-dilution adjusts their conversion price from CHF 200 to CHF 160 — they receive additional shares at founders' expense, amplifying founder dilution by an additional 10 percentage points beyond the simple proportional dilution of the new issuance.

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Hectelion advises founders and investors through down round processes to minimise dilutive impact and preserve stakeholder relationships.