Convertible Notes, SAFEs, and Priced Equity Rounds: What to Know Before You Sign
A CEO raises $1M on convertible notes, and two years later realizes they've already given up 25% of the company, because they didn't fully understand what they signed. CEOs are brilliant at building; with funding instruments, too many wing it, and the wrong terms can cost millions. Here are the three most common early-stage instruments, in plain terms, so you raise the right way. 1. Convertible Notes A convertible note is a loan with four variables (valuation cap, discount, interest rate, and maturity date) that converts into equity at your next round. Pros: widely understood, more popular with East Coast
