A primer on convertible notes, convertible securities, and equity

Hippoland

Convertible notes In the 2000s, however, the cost to start a software company decreased dramatically. Raising money on a convertible note is fast — you get your money as soon as an investor signs. There are a lot of convertible note templates on the internet.)

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. Paul Graham sparked some commentary by declaring in a tweet in August 2010 that “Convertible notes have won. Form of Convertible Security.

Should you raise on convertible notes or do an equity round?

Hippoland

A reader named Turner Dean recently asked me whether it’s better to raise seed money on convertible notes or straight-up equity. In general, I’m a big fan of convertible notes or convertible securities for seed stage founders.

What early stage fundraising in 2018 looks like?

Hippoland

It will be hard to raise a pre-seed round through traditional methods If you are raising money through traditional methods (such as with angels / micro VCs / VCs) via a convertible note or convertible security or equity deal, it will be a lot harder to raise pre-seed money in 2018.

The Legal Side of Entrepreneurship

YoungUpstarts

They also need to decide whether to structure terms as an equity deal or a convertible security deal. “If you’re going to raise $1 million, my advice is to propose a convertible security, because you can get it done quickly and less expensively,” said Schmitz.

The state of Q2 2018 pre-seed/seed-stage fundraising: Part 1 - crypto version

Hippoland

Part 2 will be for pre-seed/seed companies raising traditional equity / debt / convertible security rounds. These companies are publicly announcing their upcoming token sale (without committing to dates) and are using those announcements to generate interest that is converted into private direct sales of tokens. This year has been crazy in the fundraising landscape.

Raising Startup Capital Through Convertible Debt Financing

Business Plan Blog

Convertible Debt Financing. Among the most common methods of funding used by startups when raising seed capital is “Convertible Debt Financing.” Convertible Debt” is a loan, which is automatically converted to equity at maturity or upon the closing of a round of financing.

Knowledge Is Power: Convertible Note Financing Terms, Part II

Gust

Last week , we gave some attention to the “why” behind convertible note financing for early stage startups. A term sheet keeps things relatively straightforward by summarizing the most significant deal terms in outline form, whereas the deal documents themselves (often referred to as definitive agreements ) — even for a relatively simple convertible debt financing — inevitably contain some densely written legalese.

Legal Basics: Fully-Diluted Capital

VC Ready Blog

Fully-diluted capital expresses the entire capitalization of a company in terms of shares of the company’s common stock by taking the shares of common stock already issued and outstanding and adding shares of common stock that may be issued upon (a) conversion of any convertible securities (such as convertible preferred stock) or (b) exercise of any rights to acquire common stock underlying options, warrants or other derivative securities.

Raising Capital? 3 Tips for Entrepreneurs – Part 2

Scott Edward Walker

I’ve been helping entrepreneurs raise capital as a securities lawyer for 17+ years, and there are certain fundamental mistakes that I’ve seen entrepreneurs repeatedly make. Tip #1: Only Sell Securities to “Friends & Family” as a Last Resort. a set value at which the notes convert).

SEC Gives VC and Smaller Private Fund Managers Limited Relief from Investment Adviser Registration

VC Deal Lawyer

“Qualifying investments” are equity investments (which include convertible securities) in qualifying portfolio companies or equity securities issued in exchange for such equity investments made in qualifying portfolio companies by such portfolio company or any successor.

SEC 67

More Tech Startups are LLCs

Austin Startup

Keeping your options open favors starting out as an LLC, because converting an LLC to a C-Corp is way easier than converting a C-Corp to an LLC. Many angel investors, and also strategic investors, are comfortable investing in LLCs, particularly under a convertible security structure that doesn’t immediately result in equity holdings.

Anatomy of a Term Sheet: Conversion and Anti-dilution

VC Ready Blog

In this post we look at when an investor’s preferred stock may or must convert to common stock, and how the conversion ratio may be adjusted in certain circumstances. Preferred stock typically converts to common stock either: (a) at the option of the stockholder (“Optional Conversion”); or. (b) Second, the other issue of some concern to the company is what percentage of investors can compel all investors to convert to common.

Anatomy of a Term Sheet: Conversion and Anti-dilution

VC Ready Blog

In this post we look at when an investor’s preferred stock may or must convert to common stock, and how the conversion ratio may be adjusted in certain circumstances. Preferred stock typically converts to common stock either: (a) at the option of the stockholder (“Optional Conversion”); or. (b) Second, the other issue of some concern to the company is what percentage of investors can compel all investors to convert to common.