Many startup companies use convertible notes during the initial stages of raising money. Basically, the investor makes a loan to the company, and once an agreed upon event occurs, the debt owed to the investor converts to stock in the company. Much like a basic loan, a convertible note consists of providing money in exchange for a promise to repay the debt with interest at a future date. The main difference from a conventional loan is that the convertible note contains a mechanism in which the completion of a certain event will trigger the conversion of the debt into equity in the company. Typically, the agreed upon conversion event will be the acquisition of additional financing or the conclusion of a strategic partnership. In exchange for the investor taking the risk during the initial stage of investing, the debt will be converted into equity at a discount in the stock price given to future investors, usually between 20 to 40%. Convertible notes are also often referred to as “debt financing” or “bridge financing”.

Shouldn’t the money you raise go towards building your company and not to your lawyer? We agree, because we believe it is our duty to preserve and protect your company and the money you raise, not waste it with unnecessary legal maneuverings. We’ve done these deals before and don’t have to reinvent the wheel every time someone gets funded. We know what provisions are boilerplate and what provisions need to be negotiated, so we can focus on what is truly important and not waste your time and money.

Shouldn’t the money you raise go towards building your company and not to your lawyer? We agree, because we believe it is our duty to preserve and protect your company and the money you raise, not waste it with unnecessary legal maneuverings. With the existence of so many good model documents such as the NVCA model documents, The Funded model documents, and TechStars model documents, the lawyers don’t have to reinvent the wheel every time someone gets funded, so long as the startup and the investor agree to start with a set of model documents. We know what provisions are boilerplate and what provisions need to be negotiated, so we can focus on what is truly important and not waste your time and money.

• Adams Capital Management
• Advantage Capital Partners
• ARCH Venture Partners
• Austin Ventures
• Blue Sage Capital
• Centennial Ventures
• Centerpoint Ventures
• Covera Ventures
• DFJ Mercury
• Duchossois Technology Partners
• Emergent Technologies
• Enhanced Capital Partners
• G-51
• Gefinor Ventures
• Guggenheim Venture Partners
• Origin Partners
• Path 4
• PTV Sciences
• S3 Ventures
• Sante Ventures
• Sentient Ventures
• Sevin Rosen Funds