Supply, Demand, Savvy and Priced VS Unpriced Seed Rounds
Mark Suster has struck again with yet another contribution to the seemingly endless debate about convertible notes versus priced seed rounds. His conclusions will, of course, shock and amaze: Price the “effing” round. All the investors agree. (I probably overstated that.) I don’t want to rehash the now tedious discussion, but the following thought has occurred to me more than once: Investors who hold notes that are convertible at a discount are indifferent to the next round valuation (sort of – (a) a low valuation theoretically helps the return on the seed investment and (b) everyone likes to invest in...
More
How much to discount a convertible angel note
This issue (how much of a discount should there be on an angel note that converts into the next round of financing?) seems to come up every day. And, there does not seem to be a good answer. So, consider this: a 20% discount is, in effect, a “guaranteed” 25% return on the investment. (Of course it is not really guaranteed since you don’t get liquid until some dim point in the future, if ever.) Perhaps one way to look at what is an appropriate discount is to ask what the return should be over what period of time. 25% in six months justifies a high degree of...
More
Angel Investments: Convertible Notes versus Preferred Stock
In the context of angel investment, one question that I get on a regular basis is whether investments should be structured as preferred stock or convertible notes. As with every question that you ask a lawyer, the answer is "it depends." Here are some thoughts on the merits and demerits of each:...
More
Page:
1
