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Minor point, but from where I'm sitting, the standard term length seems to be two years rather than 12-18 months. Also, I think in a large percentage of cases,
by ericd 16y ago
Minor point, but from where I'm sitting, the standard term length seems to be two years rather than 12-18 months.
Also, I think in a large percentage of cases, the angel can convert at the cap if there's no liquidity event, so it's not necessarily going to result in mass defaults. If the startup is doing really well, this seems like a more likely outcome than the angels calling back their debt.
- cperciva 16y agoIf the startup is doing really well, this seems like a more likely outcome than the angels calling back their debt. If a startup is doing well, the worst-case scenario involves issuing stock to new investors in order to pay off the convertible debt. The problem would come in the marginal cases -- where a startup is still running and still has cash in the bank, and the founders aren't ready to give up yet, but hasn't produced anything interesting enough to bring in new investors... or to convince the convertible debt holder to keep his money in.