search: results update below


browse funds: selections are stored



recently rated:

Rated by 2
5.0

top rated funds:

Rated by 12
4.1

Rated by 12
4.0
 

Rated by 11
4.0
 

Rated by 15
4.0

Rated by 21
4.0

Rated by 31
3.9

Rated by 41
3.9

Rated by 11
3.8

Rated by 44
3.8

Rated by 106
3.8

Rated by 32
3.8

Rated by 31
3.8

Rated by 64
3.7

Rated by 23
3.7

Rated by 27
3.7

Rated by 13
3.7

Rated by 11
3.6

Rated by 17
3.6

Rated by 10
3.6
 

Rated by 62
3.6

Rated by 21
3.5

Rated by 12
3.5
 

Rated by 28
3.4

Rated by 19
3.4

Rated by 14
3.4
 

Rated by 49
3.4
 

Rated by 31
3.4

Rated by 16
3.4
 

Rated by 11
3.4

Rated by 10
3.4

Please take a moment and make a financial contribution to TheFunded. If we have helped you, help us with resources to further grow the both the site and our entrepreneur training program, The Founder Institute.

Welcome

TheFunded.com is an online community of over 20,000 CEOs, Founders and entrepreneurs to discuss fundraising, rate and review angel investors and venture capitalists, and discuss strategies to grow a startup business. Enjoy the site, and be sure to join us at our Founder Showcase events to meet the community.

  Sign-up for Membership  

TAGS: Director (1)   shareholders (1)   Lead (1)   Latin America (1)   pricing (2)    More
NEW SHOWCASE: Quid Nunc: Intelligent Time Management System for Professionals (Internet/B2C)

TAG: Debt

7
Agree
3
Disagree

5 Reasons Convertible Debt Sucks

TheFunded.com Advice

Posted by fnazeeri on 2008-06-20

Tags: Preparation Convertible Debt

PUBLIC:

I just posted this over on my blog [http://tinyurl.com/3n4wsz] but figured some folks might be interested here as well.

There are two scenarios where convertible debt is typically used: bridge financing and angel financing. I've raised convertible debt a few times and I have to say that in most angel funding scenarios it sucks as a way to finance a startup (I think it's okay for bridge funding, but I'd avoid that too if possible). Why"

PRIVATE: Members Only (3971 Characters)

7
Agree
2
Disagree

Convertible Debt

TheFunded.com Advice

Posted by Anonymous on 2007-09-11

Tags: Preparation Convertible Debt

PUBLIC:

I've had a few people recommend this as a viable (and even preferable) option for us. I know there have to be others out there who are looking for honest feedback as well.

Experienced entrepreneurs - post your thoughts (as comments) on whether its a good, a bad, or (as I suspect) a conditional thing.

PRIVATE: Members Only (151 Characters)

4
Agree
1
Disagree

A Round Valuations Down 25 50% While B and C Rounds Non Existent

TheFunded.com Advice

Posted by fnazeeri on 2008-12-10

Tags: Venture Business Valuation Venture Debt Convertible Debt

PUBLIC:

More here.

PRIVATE: Members Only (1627 Characters)

2
Agree
0
Disagree

Lending and Sba Backed Loans

TheFunded.com Discussion

Posted by Anonymous on 2009-04-22

Tags: Operations Debt Banks TARP

2
Agree
1
Disagree

National Venture Capital Association President Admits They are Going After Small Business Programs

TheFunded.com Discussion

Posted by Anonymous on 2009-02-09

Tags: Venture Business Debt Government

2
Agree
0
Disagree

Venture Debt Pros and Cons in the Current Situation

TheFunded.com Discussion

Posted by Anonymous on 2008-12-12

Tags: Preparation Venture Debt

2
Agree
0
Disagree

Venture Debt for Startups

TheFunded.com Advice

Posted by fnazeeri on 2008-05-26

Tags: Operations Venture Debt

PUBLIC:

I always thought it was crazy for early stage companies to take on venture debt. Here's a company that just raised $5MM of venture capital, is burning $300K per month and they think it's smart to raise debt"!" I admit that my view is colored by my one experience raising venture debt in 1999 which did not end well (for anyone). So recently, I decided to take a look at venture debt and talked to about a dozen lenders, quite a few startups and some other industry experts. To my surprise, I found that in some cases, it does make sense.

First, a bit about venture lenders. Various estimates put the number of firms that have serious venture lending businesses at 20-30 in the US. My take is that there are three categories of lenders: (1) banks, (2) dedicated funds with "stable capital" and (3) dedicated funds without "stable capital." By stable capital, I mean a fund that raises capital from limited partners similar to a venture capital fund. The capital is committed for a specific period of time (like 5 or 7 years or more). Bank-backed venture lenders are regulated and tend to invest in less risky areas (like capital equipment or receivables financing). Dedicated funds tend to be more aggressive and invest in "growth capital" (more on this later). The permanency of capital is an important factor as this can have an impact on the borrowers stability of capital and the willingness of a lender to work with the borrower should the company hit a rough patch.

For startups, there are three main types of venture debt: (1) equipment financing, (2) receivables factoring and (3) growth capital. There are other types of borrowing (e.g. acquisition financing, but I'm focusing on these three categories for now). Equipment financing is borrowing tied to a specific capex purchase, e.g. building out a NOC. Receivables financing is useful for companies that have material A/R against which they can usually borrow as much as 80-85%. Growth capital (also referred to as "stretch equity") has availability tied to venture metrics and is useful when the startup can use the extra capital to reach specific business benchmarks beyond those achievable with equity financing alone and that will provide a material step up in valuation (or insurance that they meet those already committed to).

Some key terms/rules-of-thumb for venture debt include:

* Availability: A/R factoring - up to 85% of receivables; equipment financing - up to 100% of specific capex; and growth capital - up to the cumulative amount of capital invested by the lead investor (minus any other debt).

* Repayment: 3 to 12 month interest only period followed by up to 36 month interest plus amortized principal period (i.e. up to 48 months).

* Rates: For working capital financing, a good rate would be prime +1% and for growth capital, a good rate would be prime +3%.

* Warrants: Expect 6-12% warrant coverage on growth capital. That means take 6-12% of the loan principal and convert that into an at-the-money warrant to purchase an amount of shares at the price of the last equity round.

* Covenants: With growth capital, you can avoid them (including a "MAC" clause), however, most working capital loans will have them.

The process for raising venture debt is straight forward. The borrower will require some material (which you probably already have from raising your last equity round) including:

* Powerpoint pitch deck
* Financials since inception
* Current cap table
* Board approved forecast
* 1-hour meeting with the CEO to get the "pitch"

After reviewing the materials and the initial meeting above, a lender will issue / negotiate a term sheet. Once accepted, that will be followed by a half-day diligence meeting with the management team, legal documentation and closing. The whole process typically takes 4-6 weeks from term sheet to close.

So in terms of who to borrow from, my assessment is that banks will offer the best price but on the least favorable terms. The dedicated funds will offer the most flexibility, but will cost more. Consequently, I'd go to banks for equipment or receivables financing, but to the dedicated funds for growth capital. If you think you'll need both (i.e. both equipment/receivables financing as well as growth capital), I'd go to the dedicated funds for growth capital first and then work w/ banks to get additional financing later.

PRIVATE: Members Only (3302 Characters)

1
Agree
0
Disagree

Terms of a Convertible Promissory Note

TheFunded.com Discussion

Posted by Anonymous on 2009-02-21

Tags: Funding Sources Convertible Debt Terms

1
Agree
0
Disagree

Pay Off Convertible Debt?

TheFunded.com Discussion

Posted by Anonymous on 2009-01-05

Tags: Operations Convertible Debt Payment

1
Agree
0
Disagree

Terms on Convertible Debt

TheFunded.com Discussion

Posted by Anonymous on 2008-11-05

Tags: Negotiation Convertible Debt Terms

1
Agree
0
Disagree

Bridge Financing Options

TheFunded.com Discussion

Posted by Anonymous on 2008-07-07

Tags: Preparation Convertible Debt Bridge

0
Agree
0
Disagree

Convertible Debt Risks

TheFunded.com Discussion

Posted by Anonymous on 2011-05-08

Tags: Risk Convertible Debt

0
Agree
0
Disagree

Looking for Convertible Debt Standard Docs

TheFunded.com Discussion

Posted by Anonymous on 2011-04-18

Tags: Forms Convertible Debt

0
Agree
0
Disagree

Is an Sec Filing Required for Convertible Debt?

TheFunded.com Discussion

Posted by Anonymous on 2010-09-14

Tags: Operations Convertible Debt SEC

0
Agree
0
Disagree

Disadvantages of Venture Debt

TheFunded.com Discussion

Posted by Anonymous on 2010-09-14

Tags: Funding Sources Venture Debt

0
Agree
0
Disagree

Debt Funding

TheFunded.com Discussion

Posted by Anonymous on 2010-08-18

Tags: Funding Sources Debt

0
Agree
0
Disagree

What about Bonds?

TheFunded.com Discussion

Posted by Anonymous on 2010-08-11

Tags: Funding Sources Debt

0
Agree
0
Disagree

Designing Angel Deal? Convertible Debt?

TheFunded.com Discussion

Posted by Anonymous on 2010-07-16

Tags: Preparation Convertible Debt Angel

0
Agree
0
Disagree

Debentures vs. Stock

TheFunded.com Discussion

Posted by Anonymous on 2010-07-09

Tags: Preparation Debt Stock

0
Agree
0
Disagree

Already Had Seed Round with Equity. is It Possible to Do a Convertible Debt Round?

TheFunded.com Discussion

Posted by Anonymous on 2010-06-20

Tags: Operations Seed Convertible Debt

0
Agree
1
Disagree

Convertible Loan: is This a New Trend?

TheFunded.com Discussion

Posted by Anonymous on 2010-06-13

Tags: Negotiation Convertible Debt

0
Agree
0
Disagree

Raising Equity for Debt for a Non Tech Eco Friendly Company

TheFunded.com Discussion

Posted by Anonymous on 2010-02-18

Tags: Funding Sources Debt

0
Agree
0
Disagree

Pros and Cons of Venture Debt?

TheFunded.com Discussion

Posted by Anonymous on 2009-12-05

Tags: Funding Sources Debt

0
Agree
0
Disagree

Feedback Requested: Recent Terms for Angel Convertible Note

TheFunded.com Discussion

Posted by Anonymous on 2009-09-16

Tags: Funding Sources Angels cash flow convertible debt revenue

0
Agree
0
Disagree

Angel Proposing 9% Royalty on Gross Sales, in Addition to $250 Convertible Debt

TheFunded.com Discussion

Posted by Anonymous on 2009-09-16

Tags: Operations Angels Convertable Debt conversion Terms Royalties Sales