

How to raise money with no lead - jeremyw
http://venturehacks.com/articles/no-lead

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dotBen
The big concern with what I read is that you need to set your own proposed
term-sheet slightly below market.

I'm not sure why a startup would want to do that.

There was also no real explanation as to why you wouldn't want a lead
investor, or what is wrong with having one.

It feels like this is doing something different for the sake of it, and fund-
raising seems to be a prime time when you don't want to do anything unusual or
different to the norm as it could spook investors and close doors.

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gojomo
The message from both PG and the VH guys seems to be this style is on the
rise, especially among the best startups -- so there shouldn't be a "this is
different and spooky" effect.

In the article Nivi rephrases "below market" as "priced to move" -- to create
excitement and eliminate the need for lengthy due diligence. Leaving a little
on the table could make sense for a faster, more-likely-to-finish-without-a-
hitch round.

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dotBen
_The message from both PG and the VH guys seems to be this style is on the
rise_

Is it though? I'm a fan of PG and VH.com but I wonder if the tail is actually
wagging the dog here.

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lecha
Question about slide 16: Why is selling preferred shares is more beneficial to
founders than convertible debt?

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cperciva
Convertible debt, being debt, has an expiry date where it must be repaid (if
it isn't converted). This could result in founders forfeiting their entire
company if they can't repay the debt.

Preferred stock, in contrast, acts like convertible debt with an infinite
expiry date -- presuming, of course, that there aren't terms allowing the
investor to force an exit at some point.

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joshu
Convertible notes can have a clause that they turn into preferred at a
specific valuation after a set amount of time. So this is not correct.

I'm really not sure how preferred acts "like" convertible debt. They are
radically different things. The main value of a convert is a) nobody really
needs to lead, as it is usually drafted by the startup, b) it is cheaper and
easier on the leg a side, and c) it doesn't set a valuation on the company.

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thomaswmeyer
well, if you have no lead, you certainly can't turn it into gold, so that
option's right out.

