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GR

Geoff Ralston

10/11/18

@ Y Combinator

Convertible notes are great for quick fundraising, but equity is often preferable for larger amounts due to better management and oversight.

Video

YC

Fundraising Fundamentals By Geoff Ralston

@ Y Combinator

Fundraising Fundamentals By Geoff Ralston

10/11/18

Related Takeaways

GR

Geoff Ralston

10/11/18

@ Y Combinator

Convertible notes are fast and simple, typically requiring only 3 to 5 pages of documentation, unlike equity deals which can involve hundreds of pages.

GR

Geoff Ralston

10/11/18

@ Y Combinator

Convertible notes are a type of debt that we no longer recommend using for fundraising.

GR

Geoff Ralston

10/11/18

@ Y Combinator

Convertible notes complicate the understanding of dilution because you haven't actually sold equity yet, making it hard to determine the real dilution impact until later funding rounds.

CL

Carolynn Levy

09/20/19

@ Y Combinator

Convertible securities, which are not stock themselves but convert into stock later, are commonly used in early-stage fundraising events.

GR

Geoff Ralston

10/11/18

@ Y Combinator

When you offer a convertible note, you're selling a promise of equity rather than actual equity in your company.

AB

Andy Bromberg

03/09/18

@ Y Combinator

The rise of convertible notes from 2005 to 2009 allowed startups to raise funds faster as the cost to start a company decreased.

LW

Liz Wessel

05/21/16

@ Y Combinator

It's important to understand the implications of raising a large round, such as giving up control and how it affects future fundraising and equity distribution.

YC

Y Combinator Cast

03/09/18

@ Y Combinator

The rise of convertible notes in venture funding, largely due to Y Combinator's influence, has changed how early-stage companies raise capital.

CL

Carolynn Levy

09/20/19

@ Y Combinator

Using convertible securities can lead to a larger number of investors in a startup, which can complicate administrative processes when seeking consent for future financing rounds.