Our problem is that the only offer on the table is likely to be convertible debt ... and I can see us getting killed in our Series A but I don't really have a huge number of choices right now.
Regards,
Andrew
Bill Payne
· 1 year ago
I wrote on the same subject recently. See an angel's perspective, "Angels: Donâ??t Use Convertible Debt to Fund Startup Ventures" at http://www.matr.net/article-29148.html
Yokum
· 1 year ago
I disagree with this post from the company/founder's perspective with respect to pre-Series A seed rounds. Raising $250K on a $XM pre-money valuation is much worse from a dilution perspective than converting $250K of debt + interest + conversion discount/warrant coverage at a $YM pre-money valuation, after the $250K is used to increase the value of the company (X and Y) by greater than the amount of the interest + conversion discount/warrant coverage. if Y > X + value of dilution hit from conversion discount/warrant coverage + interest, then convertible debt is a better deal from a dilution perspective. See http://www.startupcompanylawyer.com/2007/04/27/...
On the other hand, I generally believe that convertible debt is a bad deal for investors in pre-series A seed rounds.
fnazeeri
· 1 year ago
You raise good points. I wonder if anyone has done a study to test whether convertible debt results in higher returns to founders, on average?
fnazeeri
· 1 year ago
Reason #6: If the financial world collapses and startups can't raise equity for 6-12 months, then convertible debt really sucks!
All Comments
Our problem is that the only offer on the table is likely to be convertible debt ... and I can see us getting killed in our Series A but I don't really have a huge number of choices right now.
Regards,
Andrew
On the other hand, I generally believe that convertible debt is a bad deal for investors in pre-series A seed rounds.