Saturday, September 8, 2012

SeedRuption

I hate that title, but it's Saturday night and I'm feeling saucy.

Suster posted a rant about convertible debt vs equity. Fred followed up. Everybody's weighing in. McClure jumped in and dropped his pants, and the place went nuts and then it spilled over onto Twitter.

I can't stop commenting about it, which makes me a very poor participant in the conversation (or a great one). I'm almost a troll at this point.

My last comment was reflective, and I think it nails it.

We're talking about several different worlds. 

I don't know why I'm so obsessed with this topic but I am. Maybe it's because in some ways it's about fairness. 

What I've realized after reading the comments and reflecting  on my own experience is that
the one thing the post and many of the comments don't consider is CONTEXT. 

If I'm a hot deal in NY or SOMA, maybe I can raise and close an angel round in a few weeks. That's perfect because my team isn't worried about missing mortgage payments or phone bills just yet. 

But if I'm not in the inner circles and in the hotbed, if I'm in, say, Lancaster, PA, or BumbleFuck Kentucky (hi andy!), my fundraising isn't quite that efficient. Sometimes it takes months. 

So, context matters to deal structure. 

So maybe the guidance for deal docs should be this: 

Convertible Debt: for founders who need a rolling close so the cash can come in as it's raised.

Equity (priced round): for founders and investors who have the luxury of pulling things off relatively quickly. 

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