Season Two: Episode Nine — An overview of convertible notes, including key provisions, mechanisms for conversion, and negotiation strategy.
Episode Description: Elizabeth Ostaszewski (Fordham Law ‘19) and Christie Yeh (Fordham Law ‘19) interview Seth Helfgott (Fordham Law ‘09), Partner at Wilson Sonsini in San Francisco, to discuss convertible notes — the most common way to raise modest amounts of capital from venture capital firms at the seed stage.
- [:30] Elizabeth Ostaszewski and Christie Yeh introduce themselves and their guest Seth Helfgott and offer an overview of venture capital financing and convertible notes.
- [7:20] What terms should a borrower look for and what details should they focus on when obtaining a convertible note?
- [11:23] Convertible note negotiations and the role of the valuation cap.
- [17:10] Discount rates and their ideal percentages.
- [19:23] How exactly do convertible notes convert? An overview of the three most common mechanisms for conversion.
- [21:39] General terms that are considered non-negotiable by venture capitalists and the provisions that startups need to fight for.
- [27:09] Who controls amendments to convertible notes?
- [28:49] Understanding West Coast vs. East Coast convertible note negotiations and the new SAFE agreement.
- [30:59] Seth’s career advice for both entrepreneurs and lawyers.
Mentioned in This Episode:
- Fordham’s Entrepreneurial Law Clinic
- Follow us on Twitter @FordhamELC
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Startup LAWnchpad is the podcast that educates entrepreneurs about forming, growing and protecting a startup. Startup LAWnchpad is produced by the Entrepreneurial Law Clinic at Fordham University School of Law in New York City.