Convertible Notes and the Path Forward

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The most convertible notes that the point of the maturity date is not that the investors are actually going to come in and call the note and. Put the company into you know and insolvent position but it's a forcing function for the parties to come back to the table. To explain to founders just so they understand investors who listen to the program let's say you put a hundred thousand and you have this 8%. Okay every year that goes by let's take it takes 3 years or let's make it 10% so it's a breeze. Now it's at 110 then it's at 121 then it’s at 100 and whatever that is you know 133 or something. You've got 30

Todays show:

Wilson Sonsini Partner Becki DeGraw joins Jason on the latest edition of Startup Legal Basics! In this episode, they break down legal standards in the startup ecosystem(2:19), SAFE agreements and convertible notes(5:41), conflicts faced by founders and investors(20:58), and much more!

Time Stamps:

(00:00) Wilson Sonsini Partner Becki DeGraw joins Jason

(2:19) Breaking the box or sticking to widely accepted frameworks

(3:47) General trends and the adoption of safe agreements

(5:41) Differences between SAFE agreements and convertible notes

(10:34) Companies that raised high valuations during a hot market and need to raise funds again

(15:43) The impact of down rounds and pay-to-play provisions on investors, founders, and employees

(20:58) Conflicts faced by founders, existing investors, and new investors

(27:58) Surviving down markets

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