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It’s more complex than just that, there’s also tax implications for both investor and company. The liquidation preferences also apply in case of successful exit
by slashdev 3y ago
It’s more complex than just that, there’s also tax implications for both investor and company. The liquidation preferences also apply in case of successful exit. If you have 2x preferences on this 1.2B note, if the company is acquired for less than 2.4B, the investor takes everything and the founder gets a gift basket, if the investor has a thoughtful secretary. If the investor has a board seat, they may even be able to force the sale over the founder’s objections.
Don’t ever give your investors board seats. They are not your friends or advisors.
- ttymck 3y agoIf I understand correctly, a convertible note is much more favorable for the investor. If that is correct, is it safe to say Northvolt raised a convertible note instead of equity because their equity is not sufficiently attractive/valuable?
- slashdev 3y agoI think it’s actually beneficial to both parties, which is why it’s become the standard. It doesn’t tell you anything about the company.