As a result of the current economic climate, many start-up and growth-stage companies are faced with liquidity problems and find themselves in urgent need of funding. Funding under these circumstances typically takes the form of the issuance of the company’s equity at valuations lower than that of prior financing rounds.
Often times, the only practical source of such “down round” financing may be the company’s majority shareholders -they are motivated to protect their existing investment in the company.
