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Great discussion. Also a great link to Mark Suster's critique of convertible notes. I think the below link should be required reading for anyone who wants to
by chollida1 12y ago
Great discussion.
Also a great link to Mark Suster's critique of convertible notes. I think the below link should be required reading for anyone who wants to use the SAFE documents for fund raising.
I think there is a tendency to think if its good enough for Y Combinator then its good enough for me. Mark points out the numerous ways a convertible note can get you ni trouble. Atleast by reading it, you'll be going in with your eye's open.
http://www.bothsidesofthetable.com/2014/09/17/bad-notes-on-venture-capital/ http://www.bothsidesofthetable.com/2014/09/17/bad-notes-on-v...
- zabramow 12y agoHe makes good point, but you can also address some of the points he addresses with a Safe. His complaints seem more about poor valuations. You can assign "value" with a Safe (or a note for that matter) by putting in a cap.
- Quanticles 12y agoThey had a version of a safe without a cap and instead just a discount. A cap is lame since it's just a one-sided valuation, but if you can get away with just a discount, then that would work well.
- zabramow 12y agoWhat's the problem with a cap/valuation? General rule, whatever you raise, give up somewhere between 10-20%. You'll keep plenty of equity that way and your investor is getting a fair deal.
- deleted 12y ago[deleted]
- throwaway_cto 12y agoThere is one more major flaw to convertible notes for founders: how do you value market price for vested shares when a cofounder is leaving? See this ASK HN post: https://news.ycombinator.com/item?id=8926028 https://news.ycombinator.com/item?id=8926028 I'm in deep trouble because of this and wish I'd known better...
- zabramow 12y agovery interesting. thanks for sharing.