Startup employees which took a pay cut in exchange for equity are going to be the biggest losers.  At least VCs and private equity have some level of protection against a decline in valuation from their preferred shares&#x2F;liquidation preferences.  It won&#x27;t protect them against bankruptcy, but it is a lot better than nothing.<p>Employee&#x27;s generally don&#x27;t have that type of protection, and the liquidation preferences also decrease the value of the common shares after a down round.  So even with a relatively modest decline in overall valuations, a lot of employees are going to end up with worthless options&#x2F;shares after a down round.