The Silliness Of Recapping Seed Rounds
JULY 14, 2015
A company raises $1m of seed money from angels in a convertible note with a $6m cap. Assuming equity is raised at or above that cap, the total dilution, before the new money, is 16.6% (equivalent to an equity financing of $1m at a $6m post money valuation. ” They are running out of money. The term sheet converts all the convertible debt into a post-money valuation of $100, essentially making the convertible debt worthless.