Check this out: http://www.inc.com/matt-quinn/the-rise-of-high-resolution-fundraising.html http://www.inc.com/matt-quinn/the-rise-of-high-resolution-fu... From

Check this out: http://www.inc.com/matt-quinn/the-rise-of-high-resolution-fundraising.html http://www.inc.com/matt-quinn/the-rise-of-high-resolution-fu... From Business Insider: "Here's the deal: A convertible debt is a type of financing that has three distinct characteristics: It doesn't give the investor any legal authority in the company, thereby reducing legal fees associated with the investment (from near $40k to just $5k), and it defers valuation to the next round. In return for the risk the investors incur, they are offered a significantly upgraded rate when investing in future rounds of financing. A capped convertible debt essentially sets boundaries for that significantly upgraded rate, while still avoiding negotiations on an (often premature) evaluation of the seed or early-stage company. That cap helps avoid the conflicts of interests that arise between a VC and a company in the eventual valuation of a company. Meanwhile standard equity financing sets strict parameters on the companies valuation, gives investors legal sway with the direction of the company, and has legal fees that can reach $40k. Read more: http://www.businessinsider.com/whats-all-this-noise-about-convertible-debt-2010-8?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29&utm_content=Google+Reader#ixzz143SnyPNl http://www.businessinsider.com/whats-all-this-noise-about-co...