ByteDance Valuation Falls 26% to $223.5 Billion in New Employee Share BuybackRead more

‘Tidal Wave’ of Down Rounds Hits Startups

With cash running low, founders are conceding to sharply lowered valuations. The moves can slash their prices by as much as 96%.

Graphic by Mike Sullivan.
Graphic by Mike Sullivan.
Aug. 4, 2023 6:01 AM PDT

Turntide Technologies, a maker of electric motor systems backed by Bill Gates–founded Breakthrough Energy Ventures, was one of the more than 300 private companies that passed the $1 billion valuation threshold last year, putting it firmly into unicorn status. It’s not worth close to that anymore. The Sunnyvale, Calif., firm is nearing a deal for new capital that would likely slash its valuation by more than 80%, according to corporate filings and executives.

The trickle of down rounds that has hit the startup world over the past year is starting to become a flood, investors and lawyers say. In the most extreme cases, companies like Turntide are planning “cram-down” rounds of financing, which heavily dilute some existing investors’ stakes with diminished valuations. Investors at autonomous-delivery startup Nuro have discussed a similar move. Likewise, internet answer site Quora has recently wiped away some of its investors’ preferred ownership rights in a corporate filing, a move that often foreshadows cram-downs, lawyers say.

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