Convertible Notes: What Founders Need to Know

What is the definition of convertible debt and how to use it in early-stage startup financing. You can also see the calculations we made using our Convertible Note Calculator. To read more take a look at this article: https://www.equidam.com/practical-advice-pricing-convertible-note/ Compute your company valuation for free at https://www.equidam.com/

This document summarizes a discussion on convertible debt. Convertible debt is used as an alternative to equity financing for seed stage companies. It allows investors and entrepreneurs to avoid agreeing on a pre-money valuation up front. Convertible debt functions as a loan that converts to equity at a discount in a future financing round. While simpler than equity deals, convertible debt structures can be complicated and potentially worse than traditional equity in some scenarios if not structured properly. Common issues include multiple liquidation preferences, anti-dilution provisions, and preference overhang for later investors. Convertible debt is typically used as a bridge to another financing round or company sale.

This document discusses sources of finance for businesses. It identifies long-term sources like equity shares, preference shares, debentures, and long-term bank loans that provide fixed capital. Short-term sources include trade credit, installment credit, advances, bank overdrafts, bills discounted, short-term loans, and commercial paper that supply working capital and liquidity. The document also outlines factors to consider when choosing a source of finance like the purpose of funds, amount needed, costs involved, and tax implications.

Convertible debt financing involves providing a company with a loan that can later be converted to equity shares in the company. It is commonly used as a "bridge" between equity funding rounds. Key aspects of convertible debt include interest rates of 6-10%, conversion discounts of 15-25% off the price of future rounds, and automatic or optional conversion upon certain triggers like new funding rounds or maturity of the debt. While simpler than equity deals in some ways, convertible debt agreements can also become complex with additional terms governing stock rights, board seats, and valuation caps. Both entrepreneurs and investors face pros and cons from using convertible debt versus traditional equity.

This document discusses convertible debt financing, which is a loan that can be converted to equity. Convertible debt is commonly used as a "bridge" between equity rounds, and has become a typical way to do seed stage deals. While it puts off discussions of valuation and can be simpler than equity deals, convertible debt financing can also become complex. The document outlines basic terms like interest rates, conversion discounts, caps on conversion value, and conditions for conversion. It also notes potential complexities and subtleties to consider from the perspectives of both entrepreneurs and investors.

Are you a VC backed startup, or hoping to become one? Do you have stock options and wonder what they might be worth someday when your company sells?

This document discusses joint venture partnerships in real estate. It explains that sponsors seek partners for capital, expertise, and credibility, while investors seek investment opportunities. Typically, a limited liability company or limited partnership is formed, with the sponsor as general partner and investors as limited partners. The sponsor takes on development risk and does day-to-day work, while investors provide capital. Rewards are structured based on risks taken and value added by each party, with the goal of optimizing the transaction's financial success.

This document summarizes two types of real estate financing structures - sale and leaseback and build-to-suit. Sale and leaseback involves selling an existing asset to an investor and leasing it back long-term, allowing the seller to access cash while maintaining control. Build-to-suit involves an investor funding and developing a new asset according to the occupier's specifications and then leasing it back long-term. Both structures provide upfront cash to occupiers in exchange for long-term lease payments and maintenance of operational control. The document outlines the key steps and structures for each approach.

Explores valuation, debt capitalization, equity capitalization, term sheet provisions, and terms of new series of preferred stock.

This document discusses various sources of financing for startups, including self-funding, friends and family investments, angel investors, venture capitalists, and government grants. It notes that angels and VCs have different priorities when evaluating deals, with angels focusing more on involvement and filling gaps, while VCs prioritize potential exit routes. For early financing, startups typically use convertible debt, as it has minimal costs and postpones valuation negotiations. The document also outlines some key venture capital investment terms.

This presentation was given by Dave Young (Cooley) on 9/19/13 for Angel Bootcamp, a one day conference for angel investors to learn strategies and perspectives from active investors in Los Angeles.

This document provides an introduction to finance concepts for a business principles course. It discusses key topics like the importance of cash over profit, debt versus equity sources of funding, and the working capital cycle. The learning outcomes are to explain the difference between cash and profit, compare debt and equity, evaluate financing options, and understand the importance of cash flow to a business. The document also outlines different sources of funding like loans, leasing, overdrafts, and shares, and how their costs vary based on risk level.