Live from The Capital Network’s On Air Google Hangout: The Good, the Bad and the Ugly of Convertible Debt (Video)

Goodwin Procter partner and Founders Workbench contributor Bob Bishop recently co-hosted his second Google Hangout in The Capital Network’s “On Air” series with Ben Littauer of The Capital Network (TCN), Walnut Ventures and Boston Harbor Angels.

In this Hangout, Bob and Ben discussed the ins and outs of convertible debt vs. equity financings. They opened their discussion with an overview of  various financing alternative, and noted that convertible debt tends work best in two situations:

  1. For seed stage investments where agreement on valuation cannot be reached or where the size of the round does not justify the added cost and complexity of any equity round.
  2. As a bridge to a financing or any exit transaction.

In the context of seed stage rounds, convertible debt is an attractive financing solution for entrepreneurs because it can be a cost effective way for them to secure investment funds without having to determine valuation of their company at an early stage. For many angel investors, the option tends to be less desirable than an equity round because of the uncertainties around conversion valuation and terms and reduced control in shaping the company.

To learn more about the pros and cons of convertible debt from the perspective of the entrepreneur and investor, watch the full video of the Hangout below.

 

 
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