We believe interest rates on convertible debt should be as low as possible. This isn’t bank debt, and the funders are being fairly compensated through the use of whatever type of discount has been negotiated. If you are an entrepreneur, check out what the applicable federal rates (AFRs) are to see the lowest legally allowable interest rates; bump

Regardless of the actual thresholds, it’s important to never allow investors to negotiate different automatic conversion terms for different series of preferred stock.

While pro rata rights are pretty typical, if you have people asking for super pro rata rights or a specific portion of the next financing, you should be careful, as granting these will limit your long-term financing options.

I immediately noticed the telltale signs of a distinct lack of preparation and knowledge.

Investors will also expect a company to include copies of its financial records, budgets, major customer lists, and employment agreements in its data site.

While in many cases issuing convertible debt is easier to deal with than issuing equity, the one situation where this often becomes complex is an acquisition while the debt is outstanding. Our strong advice is to address in the documents how the debt will be handled in an acquisition.

When signing a term sheet, always ask your VC whether the terms have been approved by the partnership or if there is another approval step in the process.

The typical early stage company option pool ends up in a range of 10% to 20%, with later stage companies having smaller option pools.

Venture debt is a different type of loan that was created shortly after the birth of the venture capital industry. Venture debt relies on a company’s access to venture capital as the PSOR for the loan. Instead of focusing on historical cash flow or working capital assets, venture debt emphasizes the borrower’s ability to raise additional equity to