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It's interesting that they didn't disclose the cap, which is arguably the most important term in a convertible note. The difference between, say, a $1mm cap and
by mrkurt 15y ago
It's interesting that they didn't disclose the cap, which is arguably the most important term in a convertible note. The difference between, say, a $1mm cap and a $5mm cap is huge.
The Start Fund terms make a lot of sense to me. They're uncapped, but inherit terms (cap, discount) from later convertible notes. Caps are not entirely dissimilar from setting a valuation, which is a monstrously hard thing to do -- trending towards impossible the younger a company is.
- rdl 15y agoYeah, the Start Fund terms are IMO very smart, both for "classes" of startups, and in general as an early stage startup raising money (if it will soon raise more) and is too busy to come up with terms. I'd also consider a fixed discount above Start (e.g. "we inherit terms and get an extra 5% discount") to be reasonable in some cases. For a class, I think discounts are less silly than fixed common caps; for individual financings, caps are more reasonable than discounts, but the cap is a lot more company-specific than the discount.