On Wed, Dec 17, 2014 at 9:02 AM, Daniel Fussell <[email protected]> wrote: > > On 12/16/2014 02:11 PM, Gabriel Gunderson wrote: > > There's this: > > > https://beehivestartups.com/blog/what-convertible-note-and-how-does-it-work/ > > > > > So they want the gains of stock with the guarantees of a bond. Sounds > like a great business model for the capital provider, and a hamster > wheel for the start-up. > > Uh, no. The math doesn't work that way at all. Don't get me wrong here, I'm happy to be critical here as I usually am on investors being greedy or whatnot, but they aren't taking much of any sanctions on their investment. They are, simply speaking, taking a cut of the valuation proportional to the investment weighed against that valuation. This is both reasonable as an investor and expected as a startup. The only way you lose in this situation as a startup is if you have a valuation at a low enough amount as to give the folks holding the other end of the note more of the company than you. Note that you could also be giving up more of the company to the other investors valuing you, so this is a situation you're already forced to deal with.
-Tod Hansmann /* PLUG: http://plug.org, #utah on irc.freenode.net Unsubscribe: http://plug.org/mailman/options/plug Don't fear the penguin. */
