Closing Time Podcast

All About Term Sheets: Down Rounds

Nov 8, 2023

Exploring the challenges of justifying high valuations in the current economic climate, navigating the implications of flat and down rounds, and discussing strategies to protect investors and employees in financing rounds.

20:48

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Quick takeaways

Startups facing down rounds should prioritize clean terms over high valuations to ensure long-term success.

During down rounds, founders must protect key supporters, incentivize employees, and maintain transparent equity strategies.

Deep dives

Valuation Multiples in Healthcare Startups

The podcast discusses how the recent trend in healthcare startup valuations has shifted back to historic norms after a period of exceptionally high multiples. During the pandemic, there was a surge in technology adoption, leading to inflated valuations. However, market corrections have brought valuations down to a more reasonable range. Companies are now seeing lower multiples compared to the unprecedented levels of the past years.

Introduction

4min

Navigating Flat and Down Rounds for Long-Term Success

3min

Navigating Equity Dilution and Liability as a Founder

5min

Navigating Down Rounds and Protecting Early Investors

3min

Strategies for Protecting Investors and Employees in Down-Round Financings

5min

In Part I of our series on term sheets, Closing Time hosts Halle Tecco and Michael Esquivel tackle the reverberations from the term sheets of yesteryear. With the generous valuations and optimistic multiples of 2021—many startups now find themselves struggling to justify these figures in the current economic climate.

The hosts delve into the nuanced reality of flat and down rounds, dissecting their implications for founders and investors alike. They posit that while no one truly wins in a down round, it's a shared and necessary hurdle in the long race of business growth. Addressing the trend that "flat is the new up," they emphasize the importance of clean terms during down rounds, and suggest strategies to minimize the impact on employee morale and equity.

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Closing Time Podcast

All About Term Sheets: Down Rounds

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Valuation Multiples in Healthcare Startups

Challenges of Down Rounds and Structured Financing

Protection Strategies for Angel Investors and Early Employees

Remember Everything You Learn from Podcasts