This week I’ve connected with two founders approaching the end of their runway. One of them is out of cash and terminating employees. Another has three or so weeks of runway left but just agreed to terms on a new financing round. The founder is glad his company will live to fight another day. He’s sad about the expensiveness of the capital.

The round will be a down round. It will have a significantly lower valuation than the prior round and includes other terms that will leave previous investors and employees with little to no equity in the company. Existing team members will have equity, but materially less than before. The company will survive, but the CEO is aware that this round will have a negative impact on the company’s culture and relations with employees and previous investors.

Raising capital was challenging in 2022. Some founders opted to use their runway and wait until things improved in 2023. But things haven’t improved as much as they’d hoped. Many are at or near the end of their runway and must make difficult decisions.