Convertible Debt Terms – Survey of Market Trends 2017/2018

Image depiciting Convertible Debt graph

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Convertible debt financing continues to be an enormously popular method of fundraising for startups in their earliest stages.

In this report, released publicly for the first time, Fenwick has analyzed more than 100 of our issuer-side convertible debt transactions covering a 15-month period from Jan. 1, 2017 through March 31, 2018. The data includes a survey of terms for first money and both early- and late-stage bridge deals.

It provides insight into what is market in convertible debt terms and will be of interest to founders, board members and investors.

Key findings include:

  • Year over year, deal sizes have increased. The median overall deal size this year is up 40%, from $1 million to $1.4 million.
  • In change-of-control situations, such as the sale of a company, most deals provide for a premium payout that is a multiple on top of the repayment of the principal balance. The number of deals giving a premium has trended up year over year.
  • Conversion discounts are increasingly common, even in later-stage debt issuances.
  • Only 8% of deals used a valuation cap as a standalone provision in the absence of a conversion discount.

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