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What is convertible equity (or a convertible security)?

Startup Company Lawyer

Quick answer: convertible equity (or a convertible security) is convertible debt without the repayment feature at maturity or interest. Over the past few years, convertible debt has emerged as a quick and inexpensive method for startup companies to raise money from angel investors and early stage venture funds.

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The Legal Side of Entrepreneurship

YoungUpstarts

Entrepreneurs need to hit a happy medium with backers, not giving away too much but not making overly aggressive demands. They also need to decide whether to structure terms as an equity deal or a convertible security deal. Startups bear the costs of their financing, from the first seed investment to the sale of Series A stock.