Convertible notes are a very common startup financing method. Convertible notes contain a maturity date provision at which point the notes are to be repaid with interest. This is usually set at 18-24 months after the first convertible note investment. However, repayment of the notes upon the maturity date is usually
About two years ago I wrote “Safe and Sound? A Primer on the New YC Docs” for LaunchDFW regarding the Y-Combinator SAFE docs and their application to the Dallas-Fort Worth (DFW) startup community. My conclusion was that SAFE docs were likely too startup favorable to take off in the DFW
I recently wrote a commentary piece for the Dallas Business Journal regarding equity crowdfunding titled: “Here’s Why Crowdfunding Should Be Your Last Resort” I thought some of my readers would enjoy it. Some of the main take-homes from the article are: (1) It may not provide the boon of capital some predict
Occasionally, early investors will send extensive seed round due diligence requests to a startup way too early. By way too early, I mean when a potential investor sends your startup an 8+ page seed round due diligence request list– without having made any sort of “commitment” to invest. This transmission of a
When your startup goes through due diligence for an investment round or an exit, investor’s or buyer’s legal counsel will typically send a laundry list of document requests. These documents range from the startup’s bylaws to stock option agreements to third party contracts to prior financing documents. Quite often, these
There will never be a single standard set of financing documents, whether for seed or venture capital rounds. And interestingly, the variance in documents increases as the deals get smaller. The closest to a standard set is the NVCA forms, but those are for larger Series A/B/C type rounds. Regardless, it
I wrote an article for LaunchDFW titled “SAFE and SOUND? A Primer on the new YC Docs“. It’s somewhat geared towards the Dallas Fort Worth startup scene, but I believe it’s probably relevant for most of the country/world.
Standard seed financing terms have moved beyond the boundaries of the Bay Area, but they haven’t completely reached all parts of the globe. Of course seed investors should look to protect their investment, but some seed investors (whether in Dallas or Denmark) may look at your startup as a ‘distressed
Unlike Series A Rounds, most seed rounds of financing don’t have all investors fund their investment on the same date. Sometimes it’s a matter of logistics for investors, but mostly it’s because the startup is continuously identifying and pitching potential angel investors to join in the seed round. The startup
Most convertible notes have a price cap as a feature term. Depending on the delta between the price cap and the pre-money valuation of the qualified equity financing, the convertible note investors could receive a windfall in terms of liquidation preference. That is, the investor’s liquidation preference could exceed its
