Tech entrepreneurs take note: Convertible notes are not free money and, if not structured properly, can prevent you from raising additional financing.
Investors speaking at the TechCrunch Disrupt SF 12 conference in San Francisco this week had this gem and a few other choice observations about early-stage financing for start-ups.
“We’ve had companies come in for their Series A and not realize that they’d already given up 25% of their company” in the seed round,” said Sequoia Capital Partner Alfred Lin, referring to the fact that convertible notes are unpriced, but convert to equity stakes when founders go on to raise a priced Series A round. He added: “That you raise money at a higher valuation than your friend? That’s a false milestone for you.”
To read the full, original article click on this link: Investors Weigh In With Convertible Note Caveats for Start-Ups - Venture Capital Dispatch - WSJ
