Comments on: Why seed investors don’t like convertible notes http://cdixon.org/2009/08/12/why-seed-investors-dont-like-convertible-notes/ Sat, 20 Mar 2010 18:05:10 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: Invest In Pre-IPO Companies and Make Fast Profits http://cdixon.org/2009/08/12/why-seed-investors-dont-like-convertible-notes/comment-page-1/#comment-7308 Invest In Pre-IPO Companies and Make Fast Profits Thu, 11 Mar 2010 09:31:09 +0000 http://www.cdixon.org/?p=252#comment-7308 [...] Why seed investors don’t like convertible notes cdixon.org – chris dixon's blog [...] [...] Why seed investors don’t like convertible notes cdixon.org – chris dixon's blog [...]

]]> By: Aaron Schildkrout http://cdixon.org/2009/08/12/why-seed-investors-dont-like-convertible-notes/comment-page-1/#comment-6472 Aaron Schildkrout Mon, 01 Feb 2010 22:01:26 +0000 http://www.cdixon.org/?p=252#comment-6472 My company (which runs a nascent concept in the dating space called howaboutwe.com) is closing a seed round with a convertible note in which we put in an arbitrary dilution floor--which is essentially the same as putting in a valuation cap. The seed investors can't be dilluted to less than X% in subsequent valuation-determining events. I think it was a good solution to this problem. The big plus of a conv note is that it allows a financing without a valuation...that plus outweighs--in cases where a valuation would be hard to make--a lot of the downsides ppl mention above. My company (which runs a nascent concept in the dating space called howaboutwe.com) is closing a seed round with a convertible note in which we put in an arbitrary dilution floor–which is essentially the same as putting in a valuation cap. The seed investors can’t be dilluted to less than X% in subsequent valuation-determining events. I think it was a good solution to this problem. The big plus of a conv note is that it allows a financing without a valuation…that plus outweighs–in cases where a valuation would be hard to make–a lot of the downsides ppl mention above.

]]> By: Allan Strand http://cdixon.org/2009/08/12/why-seed-investors-dont-like-convertible-notes/comment-page-1/#comment-5929 Allan Strand Fri, 15 Jan 2010 17:06:43 +0000 http://www.cdixon.org/?p=252#comment-5929 Seeking guidance. Have won "The Masters" and 15 other golf tournaments with players using our patented Dandy putters. A growing list of billionaires play our putters and like what we do. Looking for the $1mm to promote full-time on the PGA Tour followed by $2-3.5mm for mass-marketing. Our deal is so small for big investors and too big for small investors. QUESTION: How do you get big investors to invest in small deals? If we now WIN multiple tournaments on the PGA Tour, Dandy has the potential of returning over 10X to investors. To a billionaire, it's still a small number. ANY ADVICE WOULD BE APPRECIATED Seeking guidance. Have won “The Masters” and 15 other golf tournaments with players using our patented Dandy putters. A growing list of billionaires play our putters and like what we do. Looking for the $1mm to promote full-time on the PGA Tour followed by $2-3.5mm for mass-marketing. Our deal is so small for big investors and too big for small investors. QUESTION: How do you get big investors to invest in small deals? If we now WIN multiple tournaments on the PGA Tour, Dandy has the potential of returning over 10X to investors. To a billionaire, it’s still a small number.
ANY ADVICE WOULD BE APPRECIATED

]]> By: Creating the Disruptive Microfinance Fund - Kid Mercury's Blog http://cdixon.org/2009/08/12/why-seed-investors-dont-like-convertible-notes/comment-page-1/#comment-5853 Creating the Disruptive Microfinance Fund - Kid Mercury's Blog Fri, 08 Jan 2010 20:21:10 +0000 http://www.cdixon.org/?p=252#comment-5853 [...] funding. To me this seems to make more sense in the new economic environment, though there are issues. Even though financial wizardry (creating new things to gamble on, like mortgage-backed securities) [...] [...] funding. To me this seems to make more sense in the new economic environment, though there are issues. Even though financial wizardry (creating new things to gamble on, like mortgage-backed securities) [...]

]]> By: Jonathan Marcus http://cdixon.org/2009/08/12/why-seed-investors-dont-like-convertible-notes/comment-page-1/#comment-4477 Jonathan Marcus Tue, 27 Oct 2009 18:41:01 +0000 http://www.cdixon.org/?p=252#comment-4477 Another reason that seed investors dont like convertibles is because they are simply a more complicated and esoteric financing instrument. It's hard enough to sell your earliest investors - they are investing at by far the riskiest period in corporate history, most often with their hard earned savings. Talk about a slap in the face to then ask them to invest their money without any sense of real ownership and the knowledge that an unknown set of VCs will later dictate the terms on their investment. VCs take infinitely less risk with LPs money from the comfort of their ivory towers, but then get to call the shots? Another reason that seed investors dont like convertibles is because they are simply a more complicated and esoteric financing instrument. It’s hard enough to sell your earliest investors – they are investing at by far the riskiest period in corporate history, most often with their hard earned savings. Talk about a slap in the face to then ask them to invest their money without any sense of real ownership and the knowledge that an unknown set of VCs will later dictate the terms on their investment. VCs take infinitely less risk with LPs money from the comfort of their ivory towers, but then get to call the shots?

]]> By: links for 2009-08-14 « Blarney Fellow http://cdixon.org/2009/08/12/why-seed-investors-dont-like-convertible-notes/comment-page-1/#comment-1150 links for 2009-08-14 « Blarney Fellow Sat, 15 Aug 2009 01:07:22 +0000 http://www.cdixon.org/?p=252#comment-1150 [...] cdixon.org / Why seed investors don’t like convertible notes (tags: startup vc) [...] [...] cdixon.org / Why seed investors don’t like convertible notes (tags: startup vc) [...]

]]> By: Prakash S http://cdixon.org/2009/08/12/why-seed-investors-dont-like-convertible-notes/comment-page-1/#comment-1146 Prakash S Fri, 14 Aug 2009 18:27:30 +0000 http://www.cdixon.org/?p=252#comment-1146 thanks, Chris! thanks, Chris!

]]> By: chris http://cdixon.org/2009/08/12/why-seed-investors-dont-like-convertible-notes/comment-page-1/#comment-1144 chris Fri, 14 Aug 2009 15:39:59 +0000 http://www.cdixon.org/?p=252#comment-1144 Re hacker news - http://news.ycombinator.com/item?id=761767 I simply disagree with the commenter. Just think through the incentives. If, as an investor, my convertible note converts at the next valuation price, do I want to pay a high price or a low price? As an entrepreneur, do you want investors who are incented to see you get a low valuation? Re hacker news -

http://news.ycombinator.com/item?id=761767

I simply disagree with the commenter. Just think through the incentives. If, as an investor, my convertible note converts at the next valuation price, do I want to pay a high price or a low price? As an entrepreneur, do you want investors who are incented to see you get a low valuation?

]]> By: raj http://cdixon.org/2009/08/12/why-seed-investors-dont-like-convertible-notes/comment-page-1/#comment-1143 raj Fri, 14 Aug 2009 12:24:32 +0000 http://www.cdixon.org/?p=252#comment-1143 i wonder what's pros & cons of offering founder's stock to early seed investors? i wonder what’s pros & cons of offering founder’s stock to early seed investors?

]]> By: Daily Links #84 | CloudKnow http://cdixon.org/2009/08/12/why-seed-investors-dont-like-convertible-notes/comment-page-1/#comment-1142 Daily Links #84 | CloudKnow Fri, 14 Aug 2009 08:22:27 +0000 http://www.cdixon.org/?p=252#comment-1142 [...] Dixon: Why Seed Investors Don’t Like Convertible Notes. Interesting comment on hacker news from SV startup [...] [...] Dixon: Why Seed Investors Don’t Like Convertible Notes. Interesting comment on hacker news from SV startup [...]

]]>