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Cram-down round

What is a cram-down round?

A "cram-down round" refers to a financing round where investors purchase equity from a company at a lower valuation than the valuation placed on the company during previous financing rounds. This usually happens when a company is struggling financially and cannot negotiate terms that are more favorable.

Cram-down rounds can significantly dilute the ownership stakes of existing shareholders, including founders and employees, as the new shares are often issued at a steep discount. They can also reset the terms of earlier investments. However, they can provide much-needed financing for companies that are running out of cash and options, offering a lifeline that can help a struggling company stay afloat.

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