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This is why I prefer bridge loans for seed phase startup funding (project funding, like kickstarter is completely different). With convertible notes, the early
by jaaron 14y ago
This is why I prefer bridge loans for seed phase startup funding (project funding, like kickstarter is completely different). With convertible notes, the early owners retain control and there's less risk for the investor. If everything goes well, the early investors get in on a "proven" success. If things go sour, there's still some chance of debt being repaid in a bankruptcy. Also, there's less pressure all around, as early investors can opt to just have their debt paid off, so they aren't anxiously waiting for the next round of funding or a liquidity event.
- michaelochurch 14y agoI really dislike the idea of entrepreneurs taking personal debt, if that's what you're suggesting. I think that's horrid. And when a software company goes bankrupt, how much is there to pay investors back with? Here's an idea, more oriented toward software but applicable to hardware as well. Every project has a hard deadline that is some multiplier (maybe 5-20x) on the expected time-to-completion (i.e. the soft deadline). That's mainly intended for work that is abandoned, not regular shit-happens lateness. If you're within the deadline, you own the IP outright. If you miss it, or abandon the project, the code is open source and the work is in the public domain, so anyone who wants to pick it up can.