Agreed, lower valuations during a raise ought to reduce the risk of a crushing down-round and double-or-nothing gambling. If the deal could really be structured for straight common stock, no ratchet, no option pool shuffle, etc., this could quite dramatically shift the landscape.
OTOH, it would be very interesting to see how everything comes out in the wash. Suppose one needed to raise a hard floor of $5mm: a VC that might take 10% ownership for 1x preferred and a board seat, well, what will they demand when it's strictly common on offer for that $5mm--20%, 30%? Playing along with the idea of making it big, wouldn't it make more sense not to give up so much equity?
OTOH, it would be very interesting to see how everything comes out in the wash. Suppose one needed to raise a hard floor of $5mm: a VC that might take 10% ownership for 1x preferred and a board seat, well, what will they demand when it's strictly common on offer for that $5mm--20%, 30%? Playing along with the idea of making it big, wouldn't it make more sense not to give up so much equity?