Concept-of-the-week
Underwater options
Your Series A was at $50M. Your Series B came in at $30M. Every option you granted at a $10 strike is now underwater — the current FMV is just $6. Your team knows it.
Underwater options actively push people out the door. New hires demand higher cash comp to offset the worthless paper, burning significantly more runway per head.
You have three fixes:
Repricing lowers the strike to current FMV, but triggers incremental comp expense under ASC 718.
An option exchange swaps old grants for fewer at-the-money options (10,000 underwater options become 5,000 new ones), cutting dilution by half while restoring incentive value.
Or you shift to RSUs or cash bonuses entirely.
The right call depends on how deep you're underwater and how soon you expect recovery. If your next 409A is months away and attrition is spiking, waiting costs more than the accounting hit.
What we’re watching
$189B to $13B in one month
Source: Crunchbase.com
US startup funding dropped to roughly $13 billion in March, per Crunchbase, after hitting $189 billion in February. The fall is almost entirely explained by the absence of AI megarounds — February's total was inflated by OpenAI's $110 billion raise alone.
Strip out the mega-deals and the picture shifts. Early- and mid-stage rounds are still closing at a normal pace. But the headline number shapes investor psychology. LPs see a cooling market, GPs tighten deployment, and term sheets get more disciplined. If you're raising a Series A or B right now, you're not competing with OpenAI for capital, but you are competing with the narrative that the market is slowing.
For founders planning a raise in Q2, the practical takeaway is timing: get your data room tight and move before macro noise hardens into a real pullback.
This week’s highlights
Halter raises $220M Series E at $2B valuation led by Founders Fund for virtual fencing expansion (Source)
Zipline adds $200M to its Series H, pushing the round to $800M at $7.6B valuation (Source)
Kandou AI raises $225M at $400M valuation from SoftBank, Synopsys, and Cadence for AI connectivity chips (Source)
Fal in talks to raise $300–350M at $8B valuation, up from $4.5B in December (Source)
Verily secures $300M led by Series X Capital; Alphabet drops to minority stake (Source)
See you next week,
Team EquityList
