This one's uncomfortable. Let's go through it anyway because it happens more othen than not & I don’t that to be your destiny !
Everyone hears "down round" and thinks: okay, we're worth less now, its annoying but we can survive.
That’s not a great way to think. A down round doesn't just re-price your company. It rewrites who owns what and who controls what. Permanently.
Here's how it actually plays out
You raise new shares at a lower price than last time.
Say your seed priced shares at £6, and your next round prices them at £4.
That's the trigger. Sounds manageable so far.
Then here comes’anti-dilution’.
Most priced rounds protect earlier investors from exactly this scenario — their shares convert into more common shares than originally agreed, to keep their ownership percentage intact.
Where do those extra shares come from? The common pool.
Which is mostly you, your co-founder, and your employee option pool.
The loss isn't spread evenly. It's aimed — away from protected investors, straight at founders and staff.
Then you usually get an option pool refresh on top, because you still need to hire people.
That pool expands pre-money, which means the dilution lands exactly where you have zero leverage to argue: your own stake.
Hit twice. Once by price. Once by "retention strategy."
And new investors coming in on a down round often want more than shares — extra board seats, wider veto rights, sometimes clauses that force existing investors to keep paying in or get diluted out entirely.
Nobody calls it a power grab out loud. It's considered "risk management." it hurts either way.
what that actually looks like on paper
Founders start at 60%.
A Fair pro-rata dilution would leave them at 42.9%. But once anti-dilution protection and the option pool refresh actually run, founders land at 38.7% — while the seed investors who are "protected" barely move at all.
New investors and protection mechanisms eat the difference. You and your team absorb almost all of it.
Not the new money coming in.
the part that really stings
Even if your company bounces back and beats its old valuation, this damage usually doesn't reverse.
The extra shares stay issued.
The bigger pool stays bigger.
Any control you gave up stays gone.
A company that fully recovers can still leave founders worse off than if the down round never happened.
Why I'm telling you this now
Because it connects straight back to last issue— a down round almost always comes from one root cause: a round got priced ahead of the milestones that were supposed to justify it.
Raise on proof you actually have, not proof you're hoping to have by Q3,
you protect future-you from ever sitting across that table, thinking ‘I shouldn’t have….’
📌This week in the Funding World
Four things worth reading:
1. The people writing cheques are changing — finally
The British Business Bank is putting a further £100m into its Investor Pathways initiative to help launch up to 10 new VC funds outside London, with a focus on first-time fund managers from wider backgrounds. It follows a June commitment of up to £90m across 10 new microfunds. This matters because who sits on the investment committee shapes which founders get seen as “backable.”gov
2. Women in Innovation just put actual money on the table
Innovate UK announced its biggest-ever Women in Innovation cohort: 100 women founders across digital tech, manufacturing and life sciences. Of those, 61 receive £75,000 each, plus 12 months of support; the other 39 receive the support package. Not a “celebrating women” panel. Actual non-dilutive cash.
3. The gap is still there — but the useful number is where you apply
The latest Investing in Women Code report shows its signatories put 32% of VC investment value into teams with at least one woman founder in 2025, versus 15% across the wider market. All-women teams received 6% from signatories, compared with 2% elsewhere. So no, the funding gap has not magically disappeared. But there is a much better question than “who invests in women?”: who has publicly signed up to be measured on it?
4. If you’re deep-tech, don’t give away equity before checking this
Women TechEU is open to UK-based women-led deep-tech startups and offers €75,000 in non-dilutive funding, plus tailored coaching and business support. The programme plans to support 160 companies through €12m in funding between 2026 and 2028. The criteria are specific: a woman founder/co-founder in a senior role, women holding at least 25% of the cap table, and an early-stage deep-tech company.
Read: Women TechEU 2026–27
Well unitl next time…
