Study: Startups Favoring Convertible Note Financing as Early Round Sizes Increase
Fenwick corporate partner and convertible debt survey author Evan Bienstock talked to Business Insider about the latest trends related to this attractive method of startup fundraising.
Bienstock said that convertible note financing is increasingly popular with early-stage startups.
“It is an efficient way of funding a company without necessarily placing a valuation on it,” Bienstock told Business Insider. “You can raise $1 million in convertible notes, and because you are not selling equity at a price, you don't place a firm valuation in it. It's still what we call a bridge, but now it's a bridge from the start.”
Bienstock added that he nevertheless cautions founders against having more than $2 million in notes on their balance sheets at any given time, because it may make the company less attractive to future venture investors.
The full article is available through Business Insider (subscription required).