What is a Flat Round?
A Flat Round is a round of investment where the pre-money valuation of the company is identical to the post-money valuation of the previous financing round.
In simpler terms: You raised your Seed round at a £5 million valuation. Eighteen months later, you raise your Series A, and the investors value your company at £5 million again. The valuation has remained flat.
Why does it happen? Flat rounds typically occur when a company has struggled to hit the major growth milestones it promised to investors during the previous round.
- Bad Market: The general economy or sector has cooled down, making investors cautious.
- Slow Growth: The company has survived but hasn't grown fast enough to warrant a higher price tag.
Flat Round vs. Down Round While not ideal, a Flat Round is significantly better than a Down Round.
- Flat Round: Signals stability and predictability. It’s a neutral sign that the company is still executing, even if slowly.
- Down Round: Signals distress, triggers anti-dilution clauses, and often leads to major dilution for the founders and employees.
By accepting a flat valuation, the founder avoids the punitive consequences of anti-dilution provisions and maintains the credibility of their last valuation, preserving employee morale.
Key Takeaway: A Flat Round is a pass—it means you earned the right to survive and fight another day, but you didn't accelerate as fast as your investors had hoped.
