http://www.startupcompanylawyer.com/2007/04/28/what-should-the-conversion-discount-be-for-a-bridge-note-into-preferred-stock/ Venture capital, seed financings, convertible note bridge debt, M&A, option vesting and other matters explained for founders and entrepreneurs Fri, 19 Mar 2010 08:24:58 +0000 http://wordpress.org/?v=2.9 hourly 1 http://www.startupcompanylawyer.com/2007/04/28/what-should-the-conversion-discount-be-for-a-bridge-note-into-preferred-stock/comment-page-1/#comment-347 Yokum Wed, 19 Sep 2007 22:01:21 +0000 http://www.startupcompanylawyer.com/2007/04/28/what-should-the-conversion-discount-be-for-a-bridge-note-into-preferred-stock/#comment-347 The interest rate is high, but a 20% conversion discount seems company favorable. Whether the conversion discount is high or low depends on the amount of time that the note will be outstanding/when the next round of financing will occur. The interest rate is high, but a 20% conversion discount seems company favorable. Whether the conversion discount is high or low depends on the amount of time that the note will be outstanding/when the next round of financing will occur.

]]> http://www.startupcompanylawyer.com/2007/04/28/what-should-the-conversion-discount-be-for-a-bridge-note-into-preferred-stock/comment-page-1/#comment-346 Jake Wed, 19 Sep 2007 15:40:25 +0000 http://www.startupcompanylawyer.com/2007/04/28/what-should-the-conversion-discount-be-for-a-bridge-note-into-preferred-stock/#comment-346 My company is small an cashflow positive but needs investment to grow. We've been offered a bridge note of ~$1million by a strategic partner. The terms do not include warrants but have an interest rate of 20% and a discount of 20% on conversion at the A-round. This interest rat seems very high to me. Do you have any perspective on this? My company is small an cashflow positive but needs investment to grow. We’ve been offered a bridge note of ~$1million by a strategic partner. The terms do not include warrants but have an interest rate of 20% and a discount of 20% on conversion at the A-round. This interest rat seems very high to me. Do you have any perspective on this?

]]> http://www.startupcompanylawyer.com/2007/04/28/what-should-the-conversion-discount-be-for-a-bridge-note-into-preferred-stock/comment-page-1/#comment-157 Venture Hacks — [Hack] Make your debt attractive to investors Mon, 18 Jun 2007 04:29:39 +0000 http://www.startupcompanylawyer.com/2007/04/28/what-should-the-conversion-discount-be-for-a-bridge-note-into-preferred-stock/#comment-157 [...] Increase the discount by a fixed amount and/or 2.5% per month, up to a maximum that can range from 20% to 40%. A higher discount yields a higher return for your investors. For example, a 40% discount guarantees your investors a 1.7x return on paper when the Series A closes. [...] [...] Increase the discount by a fixed amount and/or 2.5% per month, up to a maximum that can range from 20% to 40%. A higher discount yields a higher return for your investors. For example, a 40% discount guarantees your investors a 1.7x return on paper when the Series A closes. [...]

]]> http://www.startupcompanylawyer.com/2007/04/28/what-should-the-conversion-discount-be-for-a-bridge-note-into-preferred-stock/comment-page-1/#comment-42 Venture Hacks — [Hack] The benefits of debt vs. equity in a seed round Mon, 14 May 2007 08:29:47 +0000 http://www.startupcompanylawyer.com/2007/04/28/what-should-the-conversion-discount-be-for-a-bridge-note-into-preferred-stock/#comment-42 [...] rights, avoids the option pool shuffle, and gives the seed stage investors an upside through a discount and/or [...] [...] rights, avoids the option pool shuffle, and gives the seed stage investors an upside through a discount and/or [...]

]]> http://www.startupcompanylawyer.com/2007/04/28/what-should-the-conversion-discount-be-for-a-bridge-note-into-preferred-stock/comment-page-1/#comment-29 Carl Loeffler Fri, 11 May 2007 01:24:29 +0000 http://www.startupcompanylawyer.com/2007/04/28/what-should-the-conversion-discount-be-for-a-bridge-note-into-preferred-stock/#comment-29 What are the tax consequences of conversion discounts? Does the investor have realized gain equal to the discount at time of conversion, or just a lower basis? What about interest on a convertible note? Is it taxed upon conversion, even if the interest converts into stock? What are the tax consequences of conversion discounts? Does the investor have realized gain equal to the discount at time of conversion, or just a lower basis? What about interest on a convertible note? Is it taxed upon conversion, even if the interest converts into stock?

]]> http://www.startupcompanylawyer.com/2007/04/28/what-should-the-conversion-discount-be-for-a-bridge-note-into-preferred-stock/comment-page-1/#comment-17 Venture Hacks — Should you raise debt or equity? Tue, 01 May 2007 09:32:13 +0000 http://www.startupcompanylawyer.com/2007/04/28/what-should-the-conversion-discount-be-for-a-bridge-note-into-preferred-stock/#comment-17 [...] say your seed investors purchase debt with a 20% discount off the Series A share price. If you eventually sell shares in the Series A for $1 each, the seed [...] [...] say your seed investors purchase debt with a 20% discount off the Series A share price. If you eventually sell shares in the Series A for $1 each, the seed [...]

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