Why would a company offer convertible senior notes?

A senior convertible note is a debt security that contains an option making the note convertible into a predefined amount of the issuer’s shares. Both startup companies and established companies may choose to issue senior convertible notes as a means to raise funds from investors.

What is a convertible note why is it important to include it in the cap table?

A convertible note is a combination of debt and equity that helps a startup raise needed capital while still being able to delay valuing the company.

Why is a safe better than a convertible note?

The most significant difference is that SAFE notes prescribe a specific conversion method while convertible notes offer varying conversion terms. SAFE notes convert into the next round of preferred stock that the company issues in the subsequent priced financing round.

What are the basic advantages to the corporation of issuing convertible securities?

Convertible bonds offer lower interest rates than comparable conventional bonds, so they’re a cost-effective way for the company to raise money. Their conversion to shares also saves the company cash, although it risks diluting the share price.

How do convertible notes work for public companies?

When a conversion note gets issued, it automatically converts into shares of preferred stock after the Series A funding round. The share prices are based on the terms of the note. The terms will outline the due date or maturity date, and they’ll also show the balance due along with interest.

What is a convertible note term sheet?

A Convertible Note Term Sheet is the summary outline of the key terms for a convertible debt seed financing. It is important to remember that the Convertible Note Term Sheet typically is not binding on your company or the potential investors, except for limited provisions concerning confidentiality and expenses.

How is a SAFE different from a convertible note?

A convertible note is debt, while a SAFE is a convertible security that is not debt. As a result, a convertible note includes an interest rate and maturity rate, while a SAFE does not. A SAFE is simpler and shorter than most convertible notes.