from my experience, that's dumb advice. equity financing being simpler than debt? please. worried about multiple investors with different warrant coverage? try having entirely different classes of preferred shareholders on for size.
it sounds like this post is more of a warning against convertible debt with warrants, which, while at times very beneficial to the entrepreneur, can be more complicated to understand. but debt can and should be dead-simple, should be a 3-10 page document, and can be prepared for less than $5k in legal fees.
equity, on the other hand, is generally a 30-100 page document, has many, many more negotiation points than debt, and, due to the extreme complexity, can easily cost anywhere from $15k-$70k in legal fees.
further, a well negotiated debt agreement can be very beneficial to the founders, while being relatively fair to the investors: the founders get to benefit from a Series A upside down the road. even if you don't have the leverage to pull off a conversion of debt based on a discount of the series A price, a capped conversion isn't such a bad thing, either, given that it's so much simpler to pull off than equity.
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from my experience, that's dumb advice. equity financing being simpler than debt? please. worried about multiple investors with different warrant coverage? try having entirely different classes of preferred shareholders on for size.
it sounds like this post is more of a warning against convertible debt with warrants, which, while at times very beneficial to the entrepreneur, can be more complicated to understand. but debt can and should be dead-simple, should be a 3-10 page document, and can be prepared for less than $5k in legal fees.
equity, on the other hand, is generally a 30-100 page document, has many, many more negotiation points than debt, and, due to the extreme complexity, can easily cost anywhere from $15k-$70k in legal fees.
further, a well negotiated debt agreement can be very beneficial to the founders, while being relatively fair to the investors: the founders get to benefit from a Series A upside down the road. even if you don't have the leverage to pull off a conversion of debt based on a discount of the series A price, a capped conversion isn't such a bad thing, either, given that it's so much simpler to pull off than equity.