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Convertible Note Seed Financings: Founders Beware!
by Scott Edward Walker on May 15th, 2012
This post is the third part of a three-part primer on convertible note seed financings. Part 1, entitled “Everything You Ever Wanted To Know About Convertible Note Seed Financings (But Were Afraid To Ask),” addressed the basics. Part 2, entitled “Convertible Note Seed Financings: Econ 101 for Founders,” addressed the economics. This part will address certain tricky issues.
[This post was originally published on TechCrunch.]
Walker Twitter Highlights: April 16th – 22nd
by Scott Edward Walker on April 23rd, 2012I’m using Twitter as a form of micro-blogging to share interesting blog posts, articles and podcasts relating to entrepreneurship and startups, M&A and legal issues. Below are my five most popular tweets (via bit.ly) for the past week and a few blog-related tweets. If you’d like to see all of my tweets (or an RSS feed of them), you can do so here. Cheers, Scott
Convertible Note Seed Financings: Econ 101 for Founders
by Scott Edward Walker on April 22nd, 2012
This post is the second part of a three-part primer on convertible note seed financings. Part 1, entitled “Everything You Ever Wanted To Know About Convertible Note Seed Financings (But Were Afraid To Ask),” addressed certain basic questions, such as (i) what is a convertible note? (ii) why are convertible notes issued instead of shares of common or preferred stock? and (iii) what are the advantages of issuing convertible notes?
This part 2 will address the economics of a convertible note seed financing and the three key economic terms: (i) the conversion discount, (ii) the conversion valuation cap and (iii) the interest rate.
Part 3 will cover certain special issues, such as (i) what happens if the startup is acquired prior to the note’s conversion to equity? and (ii) what happens if the maturity date is reached prior to the note’s conversion to equity?
[Note: This post was originally published on TechCrunch.]