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As an angel investor, I despise convertible notes. Mostly for the same reasons. I am taking my bet now, so I would like to invest at the valuation now, too. I s
by joshu 17y ago
As an angel investor, I despise convertible notes. Mostly for the same reasons. I am taking my bet now, so I would like to invest at the valuation now, too. I suppose this is mainly just the perception of risk after the check has been written. So caps are necessary, if they are reasonable (I just imagine that that is the price at which I am buying the equity.)
Things I've seen that also bother me: Notes with embedded Preferred terms, in case there is no conversion event (now I have to negotiate preferred terms; the point was to avoid doing this now) and notes that allow early repayment without recourse (you buy out some early investors before a funding round.)
- grellas 17y agoVery good points. Many of the companies I represent face this same resistance to such notes from early-stage investors, and for the reasons you note, and in such cases I tell them just to do a Series AA if they want to keep it simple while still accommodating investor concerns.