Convertible Debt: What You Need to Know

Over the past few years, we’ve worked with thousands of startups at every imaginable stage. After a while, you start to pick up on trends and commonalities – including common pain points. One of the most universal? Convertible debt.

Chances are, you feel a headache coming on at the mere mention of convertible debt – we’ve been there. This common struggle motivated us to create a comprehensive series of posts cutting through to the core of what convertible debt can mean for your company. We’ve culled through our most trusted resources and our own experiences to bring you the type of easily digestible, practical information you’ve been looking for.

1. Convertible Debt Simplified
   Let’s boil this down to the essentials. We’ve laid out the basic components in the simplest terms, so your understanding of this complicated concept will have a solid foundation.
2. Convertible Debt Basics
   Now that we’ve got a fundamental understanding of what convertible debt is, let’s take a look at why it has become an increasingly common route for startups.
3. The Convertible Debt Decision
   At this point you know what convertible debt is, and why it’s a popular choice. Now let’s compare it to other investment types, consider the investor perspective, and take a look at the potential downsides.
4. Anatomy of a Convertible Debt Note (coming soon!)
   We’ve combed through a convertible debt note and a term sheet and translated the Legalese into English. You’re welcome.
5. The Outcomes of Convertible Debt (coming soon!) 
   Left wondering what comes after the funding has been raised? Here are a few potential outcomes for you to consider.

Hopefully by now you’re feeling much more confident in your understanding of convertible debt. Still have questions? Two options for you:

1. Take the nitty gritty stuff to your lawyer. We have opinions and experience, but that doesn’t add up to a law degree.
2. Hit us up @startupsco or pose your question on Clarity.fm, where experts are waiting to help you.