
3 key legal tips for securing angel financing - transburgh
http://entrepreneur.venturebeat.com/2009/12/21/3-key-legal-tips-for-securing-angel-financing/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Venturebeat+%28VentureBeat%29&utm_content=Google+Reader
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grellas
A few observations on the points made in this post:

1\. _Push for the issuance of convertible notes_

Counterpoint on this from Chris Dixon ("why seed investors don't like
convertible notes"), with some detailed comments by me in the thread on
exactly what convertible notes are and the good and bad of such notes from a
startup's perspective: <http://news.ycombinator.com/item?id=761767>.

2\. _Preferred stock financings are complicated, time-consuming and
expensive._

A VC-style preferred stock financing is expensive (between reimbursing the VCs
for their legal fees and paying the company's own, can easily exceed $60K or
$70K) but startups can and do simplified preferred rounds with angels
typically for much less (easy to do a so-called Series AA round, with basic
preferences, for $5K or so with friendly angels).

3\. _If the angel insists on equity, issue shares of common stock_

This one is problematic for me, since it likely will create tax and valuation
problems for your startup (e.g., all subsequent option grants will need to
have a strike price of no less than what the angels paid per share of common
stock, creating disincentives for future key employees).

