Ask: Should a startup take $50k worth of uncapped convertible note

Posted by njx on Sunday September 30, 2012 @08:19PM
from the self-post dept.

What are the pros and cons of taking uncapped convertible note for a startup that has not taken any kind of funding

( 3 comments | 2 points | on HN )

Re:Ask: Should a startup take $50k worth of uncapped convert... by johnrgrace on Sunday September 30, 2012 @09:16PM (#4594871)

If you need the money yes, unless the note has some crazy terms.

On the pro side, you've got dry powder and runway from the $50k to keep doing what you're doing. Also you've gotten a vote from at least one investor with real money that you're doing something useful. An uncapped convertable note keeps you out of a lot of messy things like valuation etc.

On the con side, you now have an investor and you're going to need to talk with them and listen when they say things. You run the risk of having a crazy idiot to deal with.

[ Parent | on HN ]

Re:Ask: Should a startup take $50k worth of uncapped convert... by reubeneli on Sunday September 30, 2012 @09:13PM (#4594865)

There really are no cons. As long as it's an accredited investor and your docs are well written (focus on length of time to repay and amount of discount) Just know the moment you take even $1 from outside investors your clock starts ticking and you must deliver. At http://geekli.st our first investors were on a capped note. If you get offered uncapped... take it.

[ Parent | on HN ]

Re:Ask: Should a startup take $50k worth of uncapped convert... by _pius on Sunday September 30, 2012 @08:22PM (#4594758)

Should a startup take $50k worth of uncapped convertible note?

Yes, assuming the terms are standard.

[ Parent | on HN ]