Thanks for the explanation. One thing that's confusing me: if the company gets a Series A round, convertible debt is worse than the equity you would've gotten because you've essentially chosen to invest as a VC rather than an angel (which means you're investing, in all likelihood, at a higher valuation). This isn't true if the valuation cap is sufficiently small, but then why not just get equity out the door?
If the company goes bust convertible debt is worth nothing, like equity.
Where's the upside? Convertible debt seems like a strictly worse investment than stock.
If the company goes bust convertible debt is worth nothing, like equity.
Where's the upside? Convertible debt seems like a strictly worse investment than stock.