Entrepreneurs are not always aware of the different financing tools available to them when raising funding, nor the implications of the different forms of funding for their company. The three most common ways to get funding are the following:
- You can sell your shares
- You can get a loan
- Or you can use convertibles
Due to challenges with early-stage investing in shares, the convertible note was invented. Convertible notes are a debt instrument with an interest rate, which postpones the whole valuation discussion. That way, the startup is able to raise funding and use it to get the product/service into the market. The startup is able to get a track record – usually consisting of revenue/ user growth – so that when a large investor wants to invest, the valuation will be based on more than pre-startup assumptions.
Learn more about convertible notes in our video tutorial:
Convertible notes are financial products which have been at the heart of the startup scene for years. Usage of convertible notes is common worldwide in a variety of situations. It is one of the default choices for startup financing.
We hope you have enjoyed our video tutorial. If you have more questions about convertibles contact us at info@leapfunder.com.
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