WED 24 FOUND. ATION
Dec 12, 2014
WED
24 FOU
ND
.A
TIO
N
TODAY
•CONVERTIBLE NOTE
•INVESTMENT TERM SHEET
CONVERTIBLE NOTES
• IT IS A LOAN (SORT OF) • NO CURRENT VALUATION• SPEED, SIMPLICITY &
COST
AT A GLANCE:
CONVERTIBLE NOTE
CONVERTIBLE NOTE
“A document signed by a
borrower promising to repay a loan”
“Converts into shares”
INVESTOR’S OPTION
TAKE HIS MONEY BACK
CONVERT INTO SHARES
BASIC TERMS
DISCOUNT
INTEREST
MATURITY DATE
FINANCING AMOUNT
CONVERSION OPTIONS
CONVERSION OPTIONS
SALE OF THE COMPANY
VOLUNTARY CONVERSION
AUTOMATIC CONVERSION
NEGOTIATIONS
YOU THE INVESTOR FINAL
INTEREST 5% 10% 8%
DISCOUNT 10% 30% 20%
CAP NO YES ?
MATURITY DATE
2 YEARS 1 YEAR ?
SALE 1X 2X 2X
CAP – CASE STUDY
WITHOUT CAP WITH CAP
• Investor puts 100K• Investor estimates
valuation at 4M• 9 months after Round
at 20M valuation• Investor will have to buy
his shares with 20% discount at 20M valuation
• Investor puts 100K• Cap at 4M• Round at 20M• Investor buys his
shares based on the 4M valuation
WITHOUT CAP
FOUNDERS INVESTOR
END OF CONVERTIBLE NOTE
•BANKRUPTCY/CLOSING DOWN THE BUSINESS• COMPANY PAYS BACK AMOUNT WITH INTEREST• IF NO ASSETS INVESTOR GETS NOTHING
•FINANCING ROUND: INVESTOR SHARES
•EXIT: INVESTOR MONEY
WHAT DOCUMENTS YOU ARE SIGNING
CONVERTIBLE NOTE
TERM SHEET
PURCHASE AGREEMENT
THANK YOU
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