Fundraising
Inside Round
A funding round led by existing investors without participation from new outside investors.
An inside round occurs when a company raises capital exclusively or primarily from its existing investors. While sometimes done by choice (existing investors want to increase their position), inside rounds more often signal that the company couldn't attract new investors at an acceptable valuation. Inside rounds can create conflicts of interest since the same investors are setting the price on both sides of the transaction.
In Practice
Unable to find a new lead investor, a startup raises a $5M bridge round from its Series A investors at a flat valuation. The board establishes an independent committee to approve terms and avoid conflicts.
Why It Matters
Inside rounds can be lifelines or red flags. They often come with more complex terms (participation rights, ratchets) that can create misaligned incentives between insiders and the founder.
Related Concepts
Further Reading
Understanding Liquidation Preferences: What Employees Need to Know
Liquidation preferences determine who gets paid first when a startup exits. In some scenarios, investors take everything and employees get nothing — even in a 'successful' acquisition. Here's how it works.
Follow-On Strategy for Angel Investors: When to Double Down
How to think about follow-on investments in your angel portfolio — pro-rata rights, signaling risks, reserve allocation, metrics to evaluate, and when it's smarter to walk away.
How to Evaluate a VC Firm Before Taking Their Money
Not all VC money is equal. The wrong investor can slow you down, block future rounds, or make your life miserable for a decade. Here's how to do due diligence on your investors.
What VCs Actually Look for in a Seed-Stage Founder
Forget the pitch deck advice. Here's what seed investors are really evaluating — and it's not what most founders think.
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