

Ask: Should a startup take $50k worth of uncapped convertible note - njx

What are the pros and cons of taking uncapped convertible note for a startup that has not taken any kind of funding
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johnrgrace
If you need the money yes, unless the note has some crazy terms.

On the pro side, you've got dry powder and runway from the $50k to keep doing
what you're doing. Also you've gotten a vote from at least one investor with
real money that you're doing something useful. An uncapped convertable note
keeps you out of a lot of messy things like valuation etc.

On the con side, you now have an investor and you're going to need to talk
with them and listen when they say things. You run the risk of having a crazy
idiot to deal with.

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reubeneli
There really are no cons. As long as it's an accredited investor and your docs
are well written (focus on length of time to repay and amount of discount)
Just know the moment you take even $1 from outside investors your clock starts
ticking and you must deliver. At <http://geekli.st> our first investors were
on a capped note. If you get offered uncapped... take it.

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_pius
_Should a startup take $50k worth of uncapped convertible note?_

Yes, assuming the terms are standard.

