Convertible Notes - The 411 On Startups (tm)

The Pre-money vs. Post-money Confusion With Convertible Notes – Feld Thoughts

Jul

2015

The other day, Mark Suster wrote a critically important post titled One Simple Paragraph Every Entrepreneur Should Add to Their Convertible Notes. Go read it – I’ll wait. Or, if you just want the paragraph, it’s: “If this note converts at a price higher than the cap that you have been given you agree that in the ...

Concerns of a note holder | Vincent Jacobs

Jul

2015

What angels may worry about when investing in convertible notes Much has been written about the advantages and disadvantages of raising funding using convertible notes versus equity, both for startups and for investors. At Kima Ventures, we often choose to invest using convertible notes due to the speed, simplicity and cost of the transaction but, ...

Investors Weigh In With Convertible Note Caveats for Start-Ups – Venture Capital Dispatch – WSJ

May

2013

Tech entrepreneurs take note: Convertible notes are not free money and, if not structured properly, can prevent you from raising additional financing. Investors speaking at the TechCrunch in San Francisco this week had this gem and a few other choice observations about early-stage financing for start-ups. “We’ve had companies come in for their Series A ...

Discount or cap? A spreadsheet that shows what happens when a note converts.

May

2013

Venture math can be tough. Terms like convertible note, discount and cap can complicate a seemingly easy process. A convertible note is a debt instrument typically used when a company first begins to raise capital. The valuation of the company is determined at a later date, after a Series A investment. This is when a note converts to ...

Raising Angel Money — How Angels, Entrepreneurs, and VCs Think of Each Other

May

2012

This post is part of a series of posts called “Pitching a VC” that explains how to get access to VC’s, what to say when you get there and what will happen afterward. A friend of mine who lives in Silicon Valley called me lastt week to talk about his new company. He’s been a ...

Conversion Discounts in Convertible Notes

May

2012

Convertible promissory notes do not include a stated pre-money valuation. Instead, the convertible note seed investor and startup agree that the pre-money valuation for the convertible note investment will be determined by the pre-money valuation the startup receives at the Series A round. However, the convertible note investor does not receive the Series A pre-money ...

Venture Hacks Series A Cap Table, with Note Conversion and Option Pool

Apr

2012

This is a Youtube video explanation of a cap (capitalization) table example that is available online. It may take a while get your head around the terminology and concepts involving the option pool and note conversion, and their impact on valuation. It is worth taking time to understand this if you want to see how ...

Everything You Ever Wanted To Know About Convertible Note Seed Financings (But Were Afraid To Ask)

Apr

2012

We are in the golden age of seed financing. Venture capital funds, seed funds, super angels, angel groups, incubators, and “friends and family” are all playing the seed financing game and investing early in startups in an attempt to land the next Facebook. As a result, the pendulum has swung dramatically in the founders’ favor, ...

What does a convertible note bridge financing term sheet look like? : Startup Company Lawyer

Oct

2008

Here you will find the general form of a convertible note. Also, by browsing the entire convertible note section on this blog, you will find answers to many questions on these notes and bridge loans.

Redeye VC: Bridge Loans vs. Preferred Equity

Oct

2008

I, like most investors, have a strong point of view on the topic — and wanted to share my thoughts. In general, I have a strong preference for Preferred Equity. While there are a few circumstances where I would go with a Convertible Note (which I’ll outline later), I believe that: * Preferred equity better ...