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Priced Round

A funding round in which the company's value is formally determined and investors receive shares at a specific price, establishing a definitive valuation.

Cap Table & EquityRevenue Financing

FAQs

What is the difference between pre-money and post-money valuation?

Pre-money valuation is the company's agreed value before new investment is added. Post-money valuation = pre-money + investment amount. If investors put in $5M at a $20M pre-money valuation, the post-money is $25M, and the investors own 20% ($5M ÷ $25M). Founders own less of a larger pie after investment.

What is a down round?

A down round is a priced funding round where the share price (or implied valuation) is lower than in a previous priced round. Down rounds are painful for founders and existing investors because they indicate declining company value and trigger anti-dilution provisions that compensate earlier investors by issuing additional shares, further diluting founders.

Who leads a priced round and what does it mean?

The lead investor in a priced round sets the term sheet, negotiates terms on behalf of all new investors, and typically takes a board seat. Leading requires doing full due diligence and taking price risk. Other investors follow at the same terms. Having a recognized lead investor (top-tier VC) is critical for Series A credibility and often enables follow-on investors to commit quickly.

Related Terms

SAFE Note

A Simple Agreement for Future Equity — a startup financing instrument that converts to equity at a future priced round, without accruing interest or setting a maturity date.

Convertible Note

A short-term debt instrument that converts to equity at a future funding round, typically with an interest rate, maturity date, discount, and valuation cap.

Dilution

The reduction in existing shareholders' ownership percentage caused by the issuance of new shares to investors, employees, or through conversion of instruments.

Liquidation Preference

A provision giving preferred stockholders the right to receive their investment back before common shareholders in a company sale or liquidation.

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A priced round is a formal equity financing in which investors purchase newly issued preferred stock at a specific price per share, establishing the company's pre-money valuation and resulting in the issuance of a term sheet, legal documentation (Stock Purchase Agreement, Investor Rights Agreement, Right of First Refusal Agreement, Voting Agreement), and formal board and shareholder approval.

Priced rounds stand in contrast to pre-priced instruments like SAFEs and convertible notes, which defer valuation determination until the priced round occurs (converting at that event). The first institutional priced round is typically called Series A; subsequent rounds follow alphabetically (Series B, C, D, etc.), though the naming is informal.

The pre-money valuation in a priced round is the company's agreed value before the new investment is added. Post-money valuation equals pre-money valuation plus the round amount. Ownership percentages are calculated on a fully diluted basis — including all issued shares, outstanding options, warrants, and the new shares being issued.

Legal documentation for a priced round is substantially more extensive than SAFEs or notes: the Certificate of Incorporation must be amended to create the new preferred stock series, and four or more related agreements govern investor rights. Total legal fees for a Series A range from $50,000 to $150,000, compared to $1,000–$5,000 for a SAFE.

Key terms negotiated in a priced round include: liquidation preference (1x non-participating is standard; 2x or participating preferred is more investor-favorable), anti-dilution protection (broad-based weighted average is standard), board composition, pro-rata rights, information rights, and registration rights for future liquidity events.