seems to think convertible debts are a bad option. Would someone explain why both he and pg are potentially right in their own ways? (don't know if that's the case, but usually ends up being)
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.
On a capped convertible point 5 is completely negated.
Point 4 is not relevant. Since preferred comes first any way.
Point 3 is a reason to do convertible note.
Point 2 is a good point. But you really don't want to be negotiating terms on Series A (which are complex) with an angel that does not deal with them every day. If the angel is willing to just accept what you give them then maybe that is a valid point against doing a convertible.
Point 1. At least at the time of raising the convertible note it costs about 10th of the lawyer cost as a series A. Maybe the lawyer cost is higher when converting it, but presumably you care less about lawyer costs at that stage.
Capped is better but I'm still less excited. You still have to negotiate terms and whatnot (what if there's an early acquisition, do I just get paid back? Or do I get converted? At what price? etc.)
The area around his apartment is walking distance to a great complex with a ton of pan-asian restaurants... pho, korean, huge chinese grocery store, malaysian, chinese.
A real advisor will get stock in your company in exchange for connections, advice, and an ongoing relationship that includes stock vesting.
Caveat erus.
Very clever marketing though, and seems like a pretty cool guy with an interesting background. But, I'll point out that it's not hard to find cool people with tech backgrounds to rent housing from here in the valley, if you opt to rent from individuals rather than big apartment mega-complexes. I ended up in a house owned by an early PayPal employee who now helps setup tech conferences; he's been very useful and pleasant to talk to.
Then again, there probably is something to be said for doing this in a made-to-flip company. Spend as little as possible, build as fast as possible, design your life around avoiding hassle during that period, make something great, make as many connections as you can, and get out rich. This would be pretty useful in such a case. A couple points in a company that you hope to sell for high hundreds of thousands or low millions wouldn't be a bad trade at all.
