Cost Estimators 5

Do you see a little Asian child with a blank expression on his face sitting outside on a mechanical helicopter that shakes when you put quarters in it? No?

But whilst a few years ago Buzzfeed was one of the hottest venture-backed companies around, things have changed in the last couple of years. A few weeks ago, the company announced a 15% cut in its workforce, the third round of layoffs since 2017. These follow a 2016 Series G “flat” financing round, after having missed 2015 revenue targets.

The string of negative news may lead one to think that the company is in deep trouble. But in reality, topline grew by ~7% in 2017, and in a May 2018 interview, Buzzfeed CEO Jonah Peretti mentioned the company was posting “strong double-digit growth.” Why would a company growing so nicely announce such a steady stream of layoffs?

What are Down Rounds?

Every time a company raises money, it needs to agree on a pre- and a post-money valuation with its investors. The pre-money valuation is the value of the company at the time of the investment, and it is a fundamental starting point of the process of fundraising. It will give investors an idea of the amount of ownership of the company, of the level of control of the founders, and the incentive alignment between them, their investors and their key employees.

 

What are Down Rounds?

Every time a company raises money, it needs to agree on a pre- and a post-money valuation with its investors. The pre-money valuation is the value of the company at the time of the investment, and it is a fundamental starting point of the process of fundraising. It will give investors an idea of the amount of ownership of the company, of the level of control of the founders, and the incentive alignment between them, their investors and their key employees.

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