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Yes, in theory, you could pay the angel back upon note maturity (which would probably be principal + interest). However, most angels may not be too happy if th

Yes, in theory, you could pay the angel back upon note maturity (which would probably be principal + interest). However, most angels may not be too happy if that was your plan all along. They're putting money in on the hopes that your success will somehow multiply their money. If you're just planning to pay them back their interest, they might as well have put that same money into a bank. Again, it really depends on your angel -- my strong advice to you is to be forthcoming about your goals. It's better to have everyone on the same page up front... especially if you plan on having a long term relationship.

netcan 16y ago
I doubt they would sign a deal that leaves them open like that with handshake deal terms different from the on paper terms. Maybe the debt is only payable on demand. Can anyone post or point to a sample document?
- paulsingh 16y ago
  You'd be surprised. :) I'll post a note term sheet that I raised money on last year once I find it but notice the prepayment clause here: http://startuplawyer.com/convertible-notes/convertible-note-term-sheets http://startuplawyer.com/convertible-notes/convertible-note-... When you're raising on a convertible note, you're essentially taking a loan from the angel. You're promising to "pay them back" at the next financing by converting their money into stock equal to the principal + interest they've accrued on that note. If you really wanted to (and the term sheet doesn't preclude a payback), you could pay them back for only their principal & interest instead of converting them to stock.
  - netcan 16y ago
    I am :) I would be very interested if you could post that doc.
  - staunch 16y ago
    I was curious about this recently, so I looked at a ton of convertible note agreements. Almost all (if not all) included provisions like "cannot be repaid without consent" and/or "elective conversion", which I think both protect the investor against this kind of problem.
    - netcan 16y ago
      Where did you get the agreements?
colinsidoti 16y ago
Again, not an expert here, but isn't the option to pay off my debt one of the major reasons I prefer convertible notes over straight equity? And isn't it why I incentivize the angel with the option buy shares cheaper than the VC?

netcan 16y ago

I doubt they would sign a deal that leaves them open like that with handshake deal terms different from the on paper terms. Maybe the debt is only payable on demand. Can anyone post or point to a sample document?

paulsingh 16y ago
You'd be surprised. :) I'll post a note term sheet that I raised money on last year once I find it but notice the prepayment clause here: http://startuplawyer.com/convertible-notes/convertible-note-term-sheets http://startuplawyer.com/convertible-notes/convertible-note-... When you're raising on a convertible note, you're essentially taking a loan from the angel. You're promising to "pay them back" at the next financing by converting their money into stock equal to the principal + interest they've accrued on that note. If you really wanted to (and the term sheet doesn't preclude a payback), you could pay them back for only their principal & interest instead of converting them to stock.
- netcan 16y ago
  I am :) I would be very interested if you could post that doc.
- staunch 16y ago
  I was curious about this recently, so I looked at a ton of convertible note agreements. Almost all (if not all) included provisions like "cannot be repaid without consent" and/or "elective conversion", which I think both protect the investor against this kind of problem.
  - netcan 16y ago
    Where did you get the agreements?

colinsidoti 16y ago

Again, not an expert here, but isn't the option to pay off my debt one of the major reasons I prefer convertible notes over straight equity? And isn't it why I incentivize the angel with the option buy shares cheaper than the VC?