Angel investors, just like their heavenly brothers, guide a startup's path in business. They’ve been entrepreneurs themselves, some still are, and have exited companies successfully. They have advice to share and some money to spend. They are ready to take a chance and invest in your startup at a very, very early stage.
But they, too, are occasionally lost in the big and complex world of early-stage startup valuation and need a little help.
A regular early-stage startup’s profile looks like this: 3 smart people with a great idea, some code or prototype, and no idea how to validate what they have. The number varies between something like 100K and 1M with the tendency of startups pulling towards the million and investors - towards the hundreds.
For an angel investor it can be quite hard to decide on a startup. Conversely, big VCs have all it needs to do that. Additionally, they know the contracting inside-out, and have the fiscal knowledge to do it the right way.
Angels, on the other hand, are on their own or in small bunches and are not always equipped with the right financial instruments to prepare the documentation for a deal.
A convertible note solves the painful discussion over and most inconsistencies of the early-stage valuation. It is basically a debt - the money lent to you by investors is later on converted into shares. By postponing the evaluation, a big part of the discussion is taken out.
Standardizing this part can be pretty helpful for investors. It makes a deal more appealing during the critical phase of negotiation. Smoothing the deal process and shortening the time needed for it will eventually lead to more capital running free on the market. After all, the startups of today will be the companies building such campuses tomorrow.As read on the StartupBootCamp blog.