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0 pointsdavi15y ago0 comments

Not that I really know either, but I found this useful:

http://www.kalzumeus.com/2010/09/02/new-trends-in-startup-in...

“You owe me $20, with interest. Don’t worry about paying me back right now. Instead, next time you raise money or sell the company, we’re going to pretend that I’m either investing with the other guy or selling with you."

So if indinero takes more money, the early investors could sell their hypothetical convertible notes to the new investors.

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patio1115y ago

Typically you would not be selling the convertible note: that second clause is for the case where you sell the company without taking additional outside investment, in which case the convertible note owner participates in that sale as if they had an equity interest.

Angel investments are generally illiquid, modulo "you invested in Facebook or some other company which is so hot there is a secondary market and a term sheet practically causes fusion of surrounding hydrogen atoms."

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