Given all the buzz about angel and seed financing, it’s tempting to think these are easy choices. It’s a good thing we have experts to guide us!
Today our WebFWD Fellows heard the 2nd in a 3-part series for startups by our friends at Orrick, Herrington & Sutcliffe LLP, a firm very engaged with startups, particularly through its Total Access program. Orrick Partner Larry Kane walked us through various terms that entrepreneurs should consider when raising early rounds of funds.
For example, early rounds can often be raised as convertible notes (debt) rather than seed rounds (equity), and there are pros & cons to either choice. Debt has less legal costs and avoids issues of valuations, but remains on the balance sheet. It was good to learn that seed rounds are not just earlier versions of Series A rounds, but carry fewer disclosure requirements, as just one point of difference.
Overall, Larry was a wealth of information on conversions from one security to another, interest rates, risks and more. Highly recommended viewing!