Wednesday, October 18th 2017

Wash-Out Round


Wash-Out Round Meaning:
In venture capital terminology, the term Wash-Out Round refers to a financing round whereby the original owners, founders and officers of a company suffer drastic dilution in their ownership interest in the company.

Wash-Out Round Example:
For example, if a company has not reached the performance levels specified by their creditors to qualify to receive additional financing, the creditors will then issue a Wash-Out Round of financing. This effectively takes a large equity stake from the previous owners, and this type of financing typically represents a last resort before a company is forced into bankruptcy. Often, the providers of the Wash-Out Round of financing are able to take control of the company in exchange for the financing. The Wash-Out Round is also known as the “burn-out round” and the “cram-down round.” Wash-Out Round financing occurs mainly in companies which are significantly over-valued.
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