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Deal terms in venture financing transactions have changed as a result of the recent economic downturn. As capital has become scarce for many start-ups and investors are increasingly skittish, terms have shifted markedly toward the investor-favorable end of the spectrum. The venture fundraising process is now considerably longer, with more due diligence cycles and less urgency for prospective investors to commit capital. And when investors do commit to a funding round, it is often at lower pre-money valuations or in down round financings, and in most cases on terms that entrepreneurs would find unacceptable in a better market. Venture investors have the negotiating leverage in this environment. A prime example of this shift in leverage is the venture capitalist’s renewed focus on downside protection.