Convertible notes are a financial instrument that allow the startup to raise money in a more flexible way than traditional fixed rounds.
First, convertible notes help offer the first investors cheaper price. Investors that come later will pay more because it's easier and less risky to invest in something that other people have already invested in.
Second, the startup can use convertible notes to raise money more gradually. It used to be that they don't know how much they need and investors don't want to borrow large sums of money to early startups. Now the startups can more easily raise smaller amounts until they become credible enough and actually need to raise larger amounts.
Comments
Convertible notes are a financial instrument that allow the startup to raise money in a more flexible way than traditional fixed rounds.
First, convertible notes help offer the first investors cheaper price. Investors that come later will pay more because it's easier and less risky to invest in something that other people have already invested in.
Second, the startup can use convertible notes to raise money more gradually. It used to be that they don't know how much they need and investors don't want to borrow large sums of money to early startups. Now the startups can more easily raise smaller amounts until they become credible enough and actually need to raise larger amounts.