In a slow market, seed rounds are a ‘ticket to try again’.

For the past By year, everyone was predicting that the muted exit environment and bone-dry funding market would result in many late-stage companies.

We’re seeing layoffs and cost-cutting measures across the board as companies look to wind down their balance sheets. And now more and more companies are collecting less than the final investment. Unfortunately for starters, it looks like these low rounds are here to stay.

Earlier this week, Alex Wilhelm analyzed new Q1 data from Maps, which showed that the number of downhill rounds in Q1 2023 nearly quadrupled compared to the same period last year.

Down rounds have negative connotations and are often interpreted as the fault of the company or founder. But in a market where everything seems to be going down, they shouldn’t blame a company or its founders for doing anything wrong – often they just can’t understand it. Credit to VCs, many investors have been vocal over the past year about how companies should not succumb to this stigma.

This market cycle hasn’t seen a company raise a round before successfully exiting, but startups considering that opportunity should take note because companies have overcome this hurdle in the past. Meta, known at the time as Facebook, is perhaps the most well-known example. The social media company raised a low round in 2009 before going public in 2009 at a valuation of $104 billion.

But for a B2B sales startup, it can be hard to gain confidence from the meta story — the social media company always seems to operate in its own world. But there’s a story of one company that might be easier to relate to: E Ink.

For those of you who don’t know, E Inc. was founded by an MIT lab in 2011.