- published: 10 Sep 2015
- views: 6069
Learn how to build your company from experts at 500 Startups and Galvanize. Sign up for upcoming workshops at http://galvanize.com/events. So, the first general rule of thumb is convertible notes are done when you’re doing a small amount, generally under a million, you are not an expert or haven’t had a chance to do the necessary research for an equity round, Fred Wilson is not financing you, because he doesn’t do convertible notes. The other thing about convertible notes is, they don’t define the valuation as clearly. But realistically, they kind of do. About Galvanize -------------------------- Galvanize is a dynamic learning community for technology. Our community is where people and companies with the guts and smarts to create real-world change congregate and inspire each other. Ou...
Many startups are forgoing traditional seed funding in favor of convertible notes, loans which convert into stock after a company goes through its next round of funding. But are convertible notes good for startups? Are they good for investors? The Explainer Music team breaks it all down in its latest video.
Today Jay explains what a convertible note is in an early funding round along with why to consider offering them to investors or not. Have a question about launching a business that you want answered? Comment or add a video response! Jay Adelson's Twitter: http://www.twitter.com/jayadelson Email Your Questions: firstname.lastname@example.org Never Miss An Episode! Subscribe Here: http://www.youtube.com/subscription_center?add_user=askjayadelson Check Out The YouTube Channel: http://www.youtube.com/askjayadelson Facebook: http://www.facebook.com/askjayadelson More AskJay Episodes: http://www.revision3.com/askjay About Ask Jay: Entrepreneur, CEO, and business owner Jay Adelson (Equinix, Digg, Revision3, SimpleGeo) demystifies the start-up process by providing advice, tip...
What is convertible debt and how is it used in a basic way? How does it avoid the valuation question? If it defers the valuation discussion, how does it convert into equity and under what circumstances? What is the discount rate and what does that mean? How does this effect ownership percentages?
A valuation cap is something that applies to convertible notes. A convertible note is a security that is a hybrid of both debt and equity. Notes are issued in the place of priced equity, typically when a company is raising less than a million dollars and does not want to generate the legal expenses associated with a priced round. When the company issues a larger amount of capital, the notes will have the option to “convert” into the newly issued securities at a pre-set “discount” to the price of the follow-on round. These discounts typically range from 15 to 25 percent. However, in order to provide investors with some of the protections of a priced round, they add a”cap” to the valuation. The “cap” sets the highest valuation that can be used to determine the conversion price of the notes. ...
Convertible notes explained for startups, valuation caps, and examples of how convertible notes and debt work when raising money for startup financing (http://angelkings.com/course); Expert on startups and investing Ross Blankenship (http://rossblankenship.com) describes convertible note examples, how these notes work, when they're payable, and how the convertible note compares to equity rounds. Our startup expert also explains the "valuation cap" behind notes and the discount for future funding. #convertiblenote #startups #financing #equity vs. note #valuation
Convertible notes are one of the most common ways investors invest in early-stage startups. And yet, even with their popularity, they are still quite confusing to many founders. If you've looking for a greater understanding of convertible notes, check out this presentation from Kevin Smith from SEEDCHANGE (www.seedchange.com) and Gadiel Morantes from Early Growth Financial Services (www.egfs.co) where they explore how convertible notes really work, including: - Why convertible notes vs. shares of common or preferred stock - Convertible note terms - and the terms that REALLY matter - Conversion mechanics - Valuation cap - Safe alternatives to convertible notes - and more....!
A hybrid or a bridge between debt and equity is a convertible note. On the surface it works as an incredible loan that beats the odds of debt funding because it does not comply with the requisite of certainty. Who are the crazy lenders of convertible debt? Investors. We love it! It is an excellent way to manage the uncertainty and cost to estimate a company’s valuation. It does not mean that it reduces the risk or eliminates the due diligence process. Yet it makes a lot of sense when both parties – fund seeker and provider- want to shift the discussion on valuation to a later round of investment, when the company is more credible and when new funds are expected. Convertible notes provide an agreement that defines the amount of capital provided to the company, the interest rate, and three ...
Overview of some of the issues associated with use of convertible notes in capital raising
Today I'd like to talk to everyone about convertible notes. And A couple of reasons as to why starting off with credit lines is always a good thing for small businesses
Brief overview of my thoughts on why convertible notes are a poor choice for investors and entrepreneurs. (Entrepreneurship, Angel Investing)
A simple breakdown of two parts of a convertible bond and how you can easily value them.