> > > 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. > > > The way I understand convertible notes is a startup needs the money today but isn't quite ready to raise a full round. Or the startup may need the money to keep going until a round can be closed. Either situation puts the investor at more of a risk than if they are part of the round. They could invest and then the startup is unable to close the round. This may cause the company to go under before the loan can be paid back.
Another nice thing about a convertible note from the startup perspective is the valuation. Between the time the company receives the money and raises a round the valuation may change significantly. I suppose this goes both ways. /* PLUG: http://plug.org, #utah on irc.freenode.net Unsubscribe: http://plug.org/mailman/options/plug Don't fear the penguin. */
