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Bits Blog: Jawbone Raises $165 Million at Half Its Last Valuation

Jawbone, the once-hot wearable technology start-up, said on Friday that it had raised $ 165 million in funding at a valuation of $ 1.5 billion, or roughly half the amount that the company was valued at as recently as 2014, continuing a burgeoning trend of start-ups raising money at lower values than before.

A Jawbone spokeswoman said the investment will be used to fund operations, growth and new product development, but she did not immediately comment on why the valuation had fallen. Recode previously reported the 16-year-old company’s funding and lower valuation.

When private companies raise money at a lower value than they had previously, the event is known as a “down round.” On Thursday, Foursquare announced it had raised a $ 45 million round of venture capital — which people familiar with the terms have said was also a down round, with Foursquare valued at $ 250 million, less than half of the $ 650 million it was valued at during its last round in 2013.

Down rounds are increasing as Silicon Valley sobers up somewhat after a frothy period. In the last quarter of 2015, there was a major investment slowdown; funding to private companies dropped 30 percent from the previous quarter, to $ 27.3 billion, the research firm CB Insights said.

Mutual fund investors have also recently marked down the valuations of other high-profile private companies like Zenefits, Dropbox and Snapchat.

Down rounds, like the ones that Jawbone and Foursquare have raised, tend to destroy value for all of the pre-existing shareholders, including employees who own the company’s private stock.

Jawbone is trying to retain employees by making sure they don’t lose money as part of this latest financing deal. In order to do this, Jawbone said it would issue more shares to workers to make up for the reduced value of each share. This also increases their ownership stakes in the company by at least 25 percent, the spokeswoman said.

Employees at Jawbone, as at most start-ups, have to work at a company for a certain period of time before they have the right to own their stock, a process known as vesting. Jawbone said the new stock it will issue to employees who have already earned the rights to their old stock will be fully vested, meaning they don’t have to stay at the company for an even longer period before they can own the new stock.

It has been a tumultuous year for Jawbone, which is based in San Francisco. The company’s Up fitness band line faces stiff competition in a crowded market for wearable technology that is dominated by Fitbit and Apple, according to the research firm IDC.

Last year, Jawbone laid off employees as part of a restructuring. The company raised nearly $ 300 million in debt from the money management firm BlackRock last April.

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