A flat round is a financing round where the new pre-money valuation equals the previous round’s post-money valuation. The share price stays unchanged. section 10.4
The situation usually arises when a startup needs more runway but is not ready for its next major round. Investors may provide a Seed II or Seed Extension at the same price. section 10.6
The uncomfortable tradeoff
Suppose investors put in new money while the price per share remains unchanged. The company must issue additional shares, so existing holders experience pure dilution without a corresponding increase in valuation. That can keep the startup moving, but it does not create the valuation progress expected from a successful next round. section 10.6
Keep the practical picture in mind:
- A flat round is not a valuation increase: the new round starts from the previous post-money valuation. section 10.4
- New investment at the same price requires more shares, diluting existing shareholders. section 10.6
- If the company still cannot raise a Series A after Seed II, convertible-note debt may provide runway without immediately diluting shareholders. section 10.6
