
Bad Notes on Venture Capital - brentm
http://www.bothsidesofthetable.com/2014/09/17/bad-notes-on-venture-capital/
======
grellas
With seed funding, founders need to accomplish several goals: (1) raise early
money as a bridge to Series A to avoid having to take large money right up
front when valuation is at its lowest and the dilutive hit will be at its
maximum; (2) keep equity incentives priced relatively low so that a quality
team can be assembled without giving its members tax grief; (3) keep
transaction costs in raising the money reasonable; (4) move to close
relatively quickly to avoid getting sucked into the fundraising time sink.

Convertible notes and convertible equity (SAFEs) both allow founders to meet
these goals in ways that equity rounds simply do not. In this sense, they have
incredible value as tools to be used by an early-stage startup.

Are they perfect tools? Well, no. Each has its own limitations and problems
and each can be abused on either the company side or the investor side.
Founders routinely used to take uncapped convertible notes, build value,
stretch out the process, and leave the investors getting ever-diminishing
rewards all the while that their money was being used to build that value.
Investors wised up and began insisting on caps to avoid such abuses. They
wanted to protect the idea that they would get significant extra rewards for
taking the earliest-stage risk. It was not enough, e.g., to get a 20% price
discount at Series A if you convert at $20M pre-money valuation when the
company was probably worth no more than, e.g., $5M at the time you invested
the seed money. The investor insisted on locking in that ceiling on valuation
as a means of self-protection. Does this result in occasional windfalls to
bridge investors who take capped notes (or SAFEs)? Yes, it does. Does this
arrangement have attributes of something that resembles a liquidation
preference in its functioning? Well, yes, it does. Ditto for the full-ratchet
anti-dilution attributes. These things are very real attributes that do affect
the value of using these tools for founders and their companies. They add to
the negative side of the ledger.

But let us say that your startup had to give four times the value in Series A
preferred stock relative to other investors to the hypothetical investor noted
above ($20M valuation, $5M cap). What does this mean? If that early investor
put in $300K and the Series A round was for $7.5M, the early investor might
have gotten a windfall but the impact on the round is small because the
dollars involved are not large. And if the venture did not do well and the
Series A round priced at $3M, then that same investor would still get
something like a 20% discount off the lower valuation instead of having had to
peg his fortunes to the $5M value used for the cap as he would have had to do
had he taken equity. But so what? The dollars are still small and it doesn't
matter relative to the value and utility offered by using the convertible note
(or SAFE) tool. And, for every "windfall" gained by such investors, you have
all sorts of cases where the failure rate is particularly high because of the
extreme risks existing at the earliest stages before it is even determined
that a company is truly "fundable."

The value of notes and SAFEs is flexibility. Your occasional investor will get
special advantages but these are not unduly costly to you as a company. And
you have a good measure of control over how you do things. Your first note can
be capped but, as you gain traction, later notes can be uncapped. You can
raise money at any time without having to worry about creating tax risks and
without having to mess up your equity pricing. You can do the number of notes
and in the amounts you immediately need. You don't have to go through endless
negotiations over the sorts of things that can accompany an equity round
(especially protective provisions and similar restrictions on what a company
can do). You avoid giving your new investors a veto right or other significant
say on what you can do in future rounds, as you would normally have to do if
you did an early-stage equity round using preferred stock.

Basically, there is a whole different dynamic in using notes/SAFEs versus
doing an equity round. And, in most cases, it is a useful and valuable dynamic
for founders and their companies notwithstanding the trade-offs. In this
sense, the main idea of this piece that I would strongly disagree with is its
suggestion that using convertible notes is somehow a sucker deal. It can be if
done wrong but it most often is just the opposite.

Another metric for measuring the relative value of these tools is to see who
is using them. Convertible notes have had massive and widely dispersed use now
for many years. The most sophisticated investors have had no problem with them
in general, and that includes the VCs who lead Series A rounds in which
converting noteholders get the benefits of their caps and take more relative
value in the round than the VCs themselves do.

As with anything else in the startup world, founders need to use good
judgment. The points made in this piece are informed and technically accurate.
And they do underscore some clear disadvantages in using notes/SAFEs. My point
is that, notwithstanding these defects, notes/SAFEs retain great utility for
founders in the context of the broader issues they need to address (minimizing
tax risks, keeping stock price low, keeping transaction costs down, etc.). And
so this is a good piece to add to your knowledge base but it should not deter
you from using non-equity forms of seed funding as long as use of these tools
meets your bigger goals. You have control at that stage. Use that control
wisely.

~~~
jalonso510
Agree with all of this. But on your point about convertible notes not giving
governance rights that can hold up a future financing - even though this is
true from a technical perspective, in my experience the later round investors
will insist that every noteholder sign the preferred stock financing documents
at the time of the financing in order to acknowledge their note's conversion
into preferred stock. So even though the noteholders don't get to vote on the
deal as stockholders, they still can hold things up by refusing to sign,
asking for additional information etc... My advice to companies is always to
treat the noteholders as if they were already stockholders in terms of
providing them updates on the terms of the financing as it develops, giving
them time to review the term sheet, and making sure all are comfortable with
the deal so that you don't have any holdouts when it is time to close the
Series A.

------
patio11
Is there an entrepreneur willing to say "Yep, tried them, got bitten in the
hindquarters", even anonymously? I don't necessarily disbelieve here but it
strikes me that VCs have the curious property of always giving fundraising
advice which is in the interest of VCs. I acknowledge that somewhere in this
wide world there may actually be a VC motivated primarily by friends-and-
family getting appropriate compensation for risky investments but that is not
the way I will bet.

My understanding -- limited, in that I've been a party to two but from the
other side of the table -- is that a major reason they became popular is
because they take the fangs out of collusive behavior by investors. The Valley
had evolved a "Well, I'll invest if you get a lead" "Well, I'll lead if you
close $X" system which froze out a lot of companies if the founders didn't
have deep, pre-existing social networks. "You want a lead!" sounds a lot like
wistful nostalgia for this gatekeeping behavior. I understand why a gatekeeper
would see it that way. I don't understand why the gated would.

~~~
msuster
This is mark (the author).

I totally get why i would be seen as biased. I have given this advice hundreds
of times in small sessions verbally and I REALLY have no interest in driving
my point of view for me. I do 2 deals a year. It barely matters to me
personally.

Do me a favor. Ask around to experienced entrepreneurs who have done 3-5
companies and stretching back to at least the mid to late 90s. I promise you
you'll hear similar views to mine. Also, ask some very smart lawyers for a
balanced view. I think you'll mostly hear the same.

re: gate keeper protecting the establishment. I know you don't know me but
truthfully it is nothing of the sort. I think in simple life lessons. When you
matter more to a small set of people they have more interest in helping you in
tough times. If you never make mistakes or struggle then the argument of not
having strong leads makes sense. It's just that this is the edge case.

Good luck.

~~~
bdcs
Thank you for your reply on HN. Can you also please reply to grellas's post
(at or near the top)? grellas is a "very smart lawyer" who posted some
excellent counter-points to your original article. Personally, I'd love to
hear your response.

~~~
ganeumann
I think grella said the advantages of convertible notes are:

1\. First note is capped but later notes can be uncapped; 2\. Fewer tax risks;
3\. Doesn't mess up your equity pricing; 4\. You can do a number of notes with
different amounts raised; 5\. You don't give your investors the kind of
protections they would get in equity rounds.

I'd like to hear Mark's reply too. My opinion below.

I tend to think that all of these things (aside from the tax risks) are either
inconsequential in comparison to equity financing (3, 4), or simply the result
of having unsophisticated or uncaring investors (1, 5). The tax risks he did
not explain; I assume he means the risk that the IRS would use an equity round
to peg a value on shares or options given to employees that differs from what
the company assumed. If so, this risk exists no matter what.

I agree that giving the investors less protective provisions or uncapped notes
is better for the company. If you can get investors to agree to that, good for
you, but that's separate from structure.

The primary problem with convertible notes as they are used today for
entrepreneurs is that the investor gets the lower of the cap or a discount to
the next round. This optionality is paid for by the entrepreneur. And while,
as grella points out, the cost of this optionality is usually pretty low, so
is the value of the benefits he points out.

------
AVTizzle
Posts like this make me realize how amateur and inexperienced I am. Seriously.

I've taken it for granted for the past 3 years now that convertible notes were
universally regarded as the best and smartest form of fundraising for seed
rounds, just based on what I've found and read in various places online (lots
of it here on HN, for that matter...)

And here we have Suster laying out clearly the opposite side of the argument
in a way that humbles me. This is clearly an area that I have a lot to learn
from people much smarter than I.

Most YC companies go on to raise rounds using YC's SAFE, which is an
adaptation of convertible notes, right? If so, I'd love to hear a YC partner
(or partners) address these points.

~~~
not_that_noob
Everything has its pros and cons, and he's pointing out that if you have a
note with a high cap and then can't raise the next round above the cap, or if
you have multiple notes outstanding, then it _might_ mess with the mathematics
of the cap table in a bad way when you raise a priced round.

The truth is that notes and YC's SAFE are still the way to go. Why? If the
startup is taking off, then you're going to blow past your cap (which you
should set fairly) and everyone's happy. If the startup isn't headed anywhere,
well, why the hell are you raising more anyway? Consider selling or shutting
it down. The problems he's pointing out apply in this case, and frankly you
can always in such a situation consider re-negotiating prior deals if you have
to. In other words, these are theoretical objections at best.

Most 'traditional' investors used to have it good in the (good, according to
them) old days. They had the leverage, so they forced terms that were good for
them. This meant lower valuations in general compared to today, and control in
the form of board seats, which you generally had to have once you had
different classes of equity. Those days are long gone, and this strikes me as
a lament for the way things used to be.

~~~
joshu
I've done about 90 angel investments.

The average return for companies that start as a cap and not equity is < 1.

Companies that have sufficient success at the time of raise do not generally
do debt. YC biases them more towards notes, though.

~~~
arbuge
How many of those 90 were convertible notes, to put this in perspective?

~~~
joshu
Roughly half.

------
abalone
Here's the thing that's left out of this investor-friendly analysis, and why
Suster is wrong about the "irrationality" of no-cap deals: For smaller angels,
_access to the deal_ itself is valuable.

Small investors don't have access to Series A. That's why the analogy with the
stock market is broken:

 _" Can you imagine investing in the stock market where your price was
determined at a future date and the better that company performed the HIGHER
the price you paid for that investment."_

The reality is angels don't have the option of purchasing the stock after the
seed round. So, it can make perfect economic sense for an angel to pay a
premium to get access to a deal. And if that premium comes in the form of pre-
paying for a chunk of the Series A (one way to look at a no-cap deal), that
can make sense -- perhaps even more sense that an enhanced seed valuation
would. A discount would be sweetener on top of that. But to be clear: there is
a rational case for smaller investors taking no-cap deals in order to get a
chunk of the next Facebook, which they otherwise wouldn't be able to get.

Seed rounds present a unique intersection point for founders & smaller angels
where their interests overlap. I think the bigger-sized investor community are
somewhat threatened by that, and that's why we're seeing such a sophisticated
campaign against no-cap convertible notes. But the climate is now competitive
enough and small-angel platforms are getting enough traction that you can
sense their anxiety that no-caps may be coming back, to the great benefit of
founders.

~~~
jacquesm
That is an extremely interesting point.

I never thought of it that way, seeing series 'A' with some regularity and
being a (consulting) participant in the deals I never felt the urge to invest
in these deals simply because that would create a conflict of interest. But
the fact that the only investments that I did do were as an angel in 3
different companies was simply due to the fact that the rounds were very early
and the amounts were still low enough that they were in my 'bracket' or
'comfort zone'.

I guess if I felt the need or desire to participate in series 'A' I would join
an established VC as a limited partner.

One of the reasons VCs would not like to have a bunch of angel investors join
in a series A is that there would likely spontaneously combust into existence
a sort of Polish Parliament and then the deal would likely fall through.

Syndicated deals have some of these aspects already, especially if the
geographic and/or cultural spread of VCs is large.

~~~
abalone
Exactly: Tech angels who are not LPs in a VC fund are largely limited to the
seed-stage investment market. Therefore founders can negotiate better terms
(e.g. no cap).

Superangels / mini-VCs / actual VCs like Suster don't find it as appealing
because they have plenty of Series A deals come their way.

But then again I bet they would bite at a really quality opportunity at the
seed stage, because the best companies will seek larger funds at their Series
A than what superangels can offer. (So they're not necessarily seeing the best
companies at Series A.) Part of me thinks this "no cap's for suckers"
blogstorm is just FUD to improve their collective negotiating position.

The only thing dumber than a superangel taking a no-cap convertible debt deal
is a superangel passing on the next Facebook's seed because they didn't want
to pay Series A prices. That would be incredibly shortsighted.

------
joshu
So here's how the preference multiplier happens: when the company raises an
equity round, you calculate the new share price, and the noteholders are
assigned the investment's worth of shares. However, because of the change in
value, they would get more preferred shares per dollar invested than the new
investors.

So generally you get just the original price's worth of preferred and the rest
is common.

------
jsun
Wow. this is misleading. Convertible notes are the best things to happen to
startup founders in the history of fundraising.

Take a modern convertible note to an angel investor from the pre-bubble 90's
and they'd laugh you out of whatever coffee shop you happen to be sitting in.

All of the "examples" shown in the blog post make irrational arguments. Show
me one scenario (in numbers) where using a convertible note for a seed round
was suboptimal compared to an obtainable equity deal.

If I didn't know better I'd think this was an example of a VC trying to smear
an awesome instrument so hopefully they won't have to compete with investors
willing to write them.

------
Brushfire
The benefit of convertible notes / SAFE's is that you get the invested cash
IMMEDIATELY. This is a non-trivial benefit for most startups.

When raising a full round of capital, say 1M, you don't get any of it until
you 'close', after everyone is committed.

Convertible notes allow entrepreneurs to build progressively towards a close,
without waiting for all the cash to come in -- which might come too late. So,
sure, if you're flush with cash, then convertible notes are a worse idea
relative to a priced round. But when is that ever the case when fundraising?

~~~
bjt
The article's discussion of 90 day "top up" terms seems to address that.

~~~
Brushfire
Yeah, but it still isnt the same -- because for the first investor, you still
have to get them to agree to pony up the full 500k.

When dealing with smaller angels, its easier to get your first 250k - 500k in
50k-100k increments.

I _do_ like the idea of setting a price instead of a cap. Even if it means
your price is a bit lower than the cap, it should be relatively
straightforward to transition from a cap to a price with sophisticated
investors, and it protects you in any weird situation.

~~~
ganeumann
You can certainly do smaller increments with an equity round. But because
equity rounds tend to have leads and the lead is usually the biggest check,
they also tend to have most of the money committed at first close.

Many note investors also ask that a certain amount be committed before the
first close.

------
randylubin
It's my impression that everything he says, if true, can also be applied to YC
safe. Is that correct?

[http://www.ycombinator.com/documents/](http://www.ycombinator.com/documents/)

~~~
austenallred
Yes. All of that applies to SAFEs as well, which are basically convertible
notes that aren't "debt."

Basically convertible notes were kind of a financial hack that let you take
money without setting a price by calling it "debt," even though no one really
regarded it as debt. That brought along a couple small negative side effects,
but the good outweighed the bad and let you close rounds quickly without
$10-25k in legal fees and seemingly endless negotiation.

A SAFE is the same thing, but it jumps through the hoops necessary to not be
called "debt" and gets rid of those side effects.

------
ForHackernews
I don't really understand any of this. What are "convertible notes", what's a
"cap"? Is there a beginners glossary somewhere?

~~~
peterjancelis
Convertible notes are a way to invest money now (the 'note') at a valuation
that will be decided later (at 'conversion'). It is mostly used by angel
investors to invest in very young startups for which it is too hard to put a
valuation on them. The conversion of the convertible note debt into equity
happens at series A investment by venture capitalists. Often the convertible
note holders get a discount on the valuation, to compensate for putting in
their money earlier. There may also be time limits on the conversion or a cap
on the valuation.

Example: Angel invests $500K in startup in convertible note form, startup
raises 10M from venture capital firm at 90 million pre-money valuation later.
The VC firm ends up with 10% of the equity, because 10 million is 10% of 100
million post-money valuation (90m pre + 10m invested). The angel will receive
500K / 100 million = 0.5% of equity if there is no cap or discount. If there
is say a 50% discount, the angel gets 500K / 50 million = 1% equity so double
the equity. Same effect would be if there is a cap of the conversion valuation
at 50 million, i.e. no matter what valuation the VCs invest at the angel gets
at least 1% of equity because 500K / 50 million = 1%.

Hope it makes sense.

~~~
btown
This is a great and concise description. So in effect, are the terms on
convertible notes just bets on the _following_ round's valuation? In that
case, it seems to me that's not much different from valuing the company right
now, because if you have enough information (from projections & standard
multipliers for the industry/sector) to bet on the A round's valuation, you
could just interpolate a valuation at the current time...

I'm starting to realize that my gut reaction to squint skeptically at
convertible notes wasn't too far off the mark... it's like going to Vegas and
betting your company, but everyone else at the poker table has been playing
for years longer than you have...

~~~
peterjancelis
Convertible notes are a way to incentivize great execution by the founder team
between the angel round and the series A. Execute better => Higher series A
valuation => Less dilution from the convertible debt.

At the angel stage there are very little metrics and multiples to go by, hence
why you need to invest in the team and incentivize them using convertibles.

------
tptacek
The second vignette in this article has Suster suggesting that convertible
notes carry liquidation preferences and anti-dilution. Does he mean that some
subtle property of convertible notes create those terms in practice, or does
he literally mean that if you read the note paperwork you'll find a 2x
liquidation preference and a full ratchet?

~~~
joshu
liquidation pref: a subtle property of conversion (if you buy preferred only
at the cap price instead of effective price you are effectively getting >1x
your preference by ending up with more shares.)

anti-dilution: only if negotiated

~~~
tptacek
My current impression is that the "full ratchet" he's referring to is
conceptually just the deferred valuation itself.

------
api
Check my understanding?

So convertible debt isn't really debt-- it's an equity investment with
deferred closing and terms. Right?

I can see then how this can lead to bad outcomes for the entrepreneur (behaves
like a full ratchet if there's a cap) or bad outcomes for the investor (you've
deferred the conversation and agreement on expectations). But at the same time
it is in some ways simpler, and you get the cash immediately. Right?

Hmm... this is interesting. He suggests setting a price. So let's say I want
to raise convertible debt... he's suggesting that one instead says "I'm
raising one million at X" and sell convertible notes with a fixed price
instead of a cap? What would that look like?

------
lightedstar
Why don't convertible notes in the friends in family scenario just set a
multiple that will be suitable in the case equity is diluted? In this case it
seems the main interest in supporting an entrepreneur they believe in and
getting their money back - ideally at a better return than they'd get
elsewhere. For example, would a 2x return on a convertible note pose any real
problem to investors in subsequent rounds?

Glad to see so much discussion about it. After taking Venture Deals with Brad
Feld and Jason Mendelson through Kauffman Fellows Academy / Novoed, I'm quite
curious about trends on this topic.

------
tsunamifury
All of this is a distraction game played by VC's to avoid the real point of
entrepreneurship.

Make a product worth something to a target market. Sell it or get enough
traction. Find a company who would like to buy you or go public based on your
growth.

All this other stuff is a distraction created to keep you from focusing on
what you are here for. To build great things and sell it for profit.

Otherwise... whats the point. The best negotiating term is having a great
product. You won't raise your way to a product/market fit.

------
sandGorgon
Does anyone have a valuation model spreadsheet that accounts for multiple
rounds of convertible note financing, and purposed towards a Series A
conversation ?

As a founder, I have tried searching for these but never managed to find one.

I'm not sure if it is an India thing, where investors _actively discourage_
convertible notes because of the availability of several pounds of equity
flesh in exchange for angel stage funding.

------
vasilipupkin
How often do companies that end up doing a round below the original cap (
effectively a down round ) actually recover and do well? Does this really
matter? Seems like it is such a big risk to investors to invest below the cap
that they should be appropriately compensated for it, which is what the
discount accomplishes

------
jacquesm
Super good piece, required reading for anybody currently founder or co-founder
of a start-up and considering convertible notes.

------
rahooligan
according to this the main problem with notes is a down round can get you into
a lot of trouble because of the liquidation preference multiplier. but what if
you never have a down round? if you can avoid the down round, it seems like
convertible notes are still preferable. down rounds are bad even with priced
seed rounds.

~~~
joshu
The liquidation preference multiplier has to do with when noteholder gets
preferred only instead of preferred + common on rounds that are a higher
valuation than their cap.

~~~
rahooligan
According to Mark Suster's earlier article -
[http://www.bothsidesofthetable.com/2012/09/05/the-truth-
abou...](http://www.bothsidesofthetable.com/2012/09/05/the-truth-about-
convertible-debt-at-startups-and-the-hidden-terms-you-didnt-understand/),
there are 2 main downsides to convertible notes from a founder's point of
view:

1) If an investor invests $500k at a $4.5MM cap, he signs up to get 10% of the
company assuming the Series A priced round will be at a higher valuation. But,
if Series A is at a lower valuation, say $2.5MM, then the investor gets 20% of
the company. However, if there was a discount associated with the convertible
note then the note converts at 80% of $2.5MM. So a down round is really bad
for the founder. But I can't imagine a down round being much better for a
priced round.

2) If the Series A is $3MM at $12MM pre with 1x liquidation preference, the
Series A investor gets 20% of the company. The seed investor who invested
$500k will have his shares converted at the $5MM valuation. However, he will
end up with a 3x liquidation preference or $1.5MM in liquidation preferences.
I think this is okay as long as you raise a few hundred thousand dollar
convertible note seed round. If the convertible note seed round ends up to be
in the $1MM range I think this can become an issue for the Series A investor
which is Suster's main point.

Convertible notes have benefits like high resolution financing, less control &
no board seats. I still think convertible notes are the way to go if you are
raising a few hundred thousand dollars in seed. But if you raising a seed in
the $1MM range, it seems like priced rounds are preferred.

~~~
joshu
re #2: Yes, many notes have the provision to make sure the investor gets a 1x
preference on dollars invested (some preferred and some common for their
investment.) and this is, IMO fair.

re high resolution financing: if you are offering different investors at
different prices, you are likely to make your investors less than happy with
you.

re less control and no board seats: in my experience, having a board
correlates strongly with success. so i think this is a negative. to put money
where my mouth is - for my last startup, I took a board even though I did not
have to.

re raising a few hundred thousand or less: in my experience, strongly
correlated with startup death.

~~~
rahooligan
re high res financing: closing dates can also vary in addition to cap. i've
personally experienced varying closing dates with same cap and the initial bit
was much needed at the time. haven't experienced priced yet but can imagine
process being a bit slower.

re less control and no board seats: agreed. though i think it depends on the
board member. in your case, i'm sure he was top notch :)

re raising few hundred thousand or less: hmm, don't have enough data. but
uber's initial round was $200k. [https://angel.co/uber](https://angel.co/uber)

~~~
joshu
Uber was cofounded by someone with a large exit. This number does not
represent the actual finances available and is likely misreported. I have a
single exception to the low initial raise as well. Still anecdata and does not
really refute the point. There are successes, but there are way, way more
failures; early investors hate to reinvest pre-traction.

------
AndriusWSR
Any more good pieces regarding this topic? Super interesting!

~~~
jacquesm
[http://www.startupcompanylawyer.com/2011/01/09/is-
convertibl...](http://www.startupcompanylawyer.com/2011/01/09/is-convertible-
debt-with-a-price-cap-really-the-best-financing-structure/)

------
taytus
Only morons start a business on a loan - Mark Cuban
[https://www.youtube.com/watch?v=KYneLGRTgy8](https://www.youtube.com/watch?v=KYneLGRTgy8)

------
notastartup
does this mean that the founders in that story accept money based on the
agreeement that whatever the VC thinks their stake is is what will be the
valuation? I'm a little fuzzy on how this works.

------
mmphosis
VC wants to make money.

VC wants to make money off of your work/startup/company.

VC makes money using the given terms.

When it comes right down to it. The money they "give" is not given. It is a
loan with terms and conditions. You need to be aware of this. You need to know
what a loan is. It is money you are borrowing that you must pay back WITH
INTEREST. Find out how much interest that is.

"It’s like we need a finance 101 course for entrepreneurs"

Debt money is bad. I realize a lot of people will tell you that this is how
the world runs, or this how they run their business, or I got successful in
business taking out a big loan, etc and so on. Like the gambler, they don't
tell you about all the losses.

Save your money. Keep your work/startup/company.

[http://www.gamesradar.com/nintendo-doomed-not-likely-just-
ta...](http://www.gamesradar.com/nintendo-doomed-not-likely-just-take-look-
how-much-money-its-got-bank/)

I've read that Microsoft has always had enough money in the bank to operate
for a full year without making any money.

~~~
serve_yay
It is just impossibly more complicated than this. Financing a company with
venture capital is no time to break out the folksy wisdom. "Well, it's just a
loan with interest". Good lord, no.

