Raising Capital in the Early Stages: The KISS—Convertible Debt or Equity—Part Two
In part one, we covered the basics of a Keep It Simple Security (KISS). This week, we go into greater detail about the conversion of both the debt and equity type KISS, plus the pros and cons of each. Conversion The debt and equity KISS have more complexity at conversion than basic convertible debt or a Simple Agreement for Future Equity (SAFE). Here are the three major components of KISS conversion simplified: 1. Both the debt and equity KISS convert to preferred stock when
Raising Capital in the Early Stages: The KISS—Convertible Debt or Equity—Part One
Last week’s post covered raising cash using a SAFE. This week, we’ll cover the KISS or Keep It Simple Security, Part One. KISS Basics The KISS was developed by 500 Startups to allow early-stage companies to raise capital quickly from accredited investors without significant expense. It comes in two versions, a debt type—which accrues interest and has a maturity date—and an equity type, which comes with neither. Both convert into equity, like Convertible Debt (CD) or the SAFE.
Raising Capital in the Early Stages: Convertible Equity—The SAFE
Last week’s post covered raising cash using convertible debt (CD). This week, we’ll cover the SAFE or Simple Agreement for Future Equity. SAFE Basics Developed by Y Combinator in 2013, the SAFE is a relatively simple agreement that can be executed quickly to allow early-stage companies to raise capital. Using a SAFE, investors provide cash in exchange for the right to obtain company stock in the future when a Preferred equity round is raised or when the company gets acquired.
Raising Capital: Friends, Family, and Convertible Debt in the Early Stages
“Fundraising is one of the most difficult parts of the startup world . . . (for) first-time founders this is an even more daunting process.” — Will P. Martin, @willpmartin Last week’s post covered raising capital by selling conventional debt to friends and family (F&F) and why that isn’t a good idea. This week, we’ll flip the series into one of three methods of raising capital for your start-up that can put your company in a better position for growth. Convertible Debt Basics
Raising Capital: Friends, Family, and Conventional Debt in the Early Stages
In the last post, we covered raising cash by selling common stock to friends and family (F&F). This week, we’ll cover raising early-stage capital by taking a loan from this group and what that means for your business. Early Stage
As previously discussed, most investors in follow-on rounds expect that you used your own money plus sweat equity to fund your business. If you’re savvy, you’ll already know from your detailed financial plan what your cash needs will be going forwar
Raising Capital: Friends, Family, and Stock in the Early Stages
In the last month, we’ve had three founders come to us with questions and problems related to raising money for their early stage start-ups. In the next few installments, we’ll cover critically important issues of executing an early stage raise. Early Stage: Your Money Plus Sweat Equity In the early stage of your company, it's likely you will be funded using your own money plus sweat equity. Most investors you'll seek for follow-on rounds will expect that you did both, as it
