Utah Form of Convertible Promissory Note, Preferred Stock
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How to fill out Form Of Convertible Promissory Note, Preferred Stock?
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FAQ
A convertible note is a debt instrument often used by angel or seed investors looking to fund an early-stage startup that has not been valued explicitly. After more information becomes available to establish a reasonable value for the company, convertible note investors can convert the note into equity.
In recent years, SAFEs have become the most common convertible instrument due to their relative simplicity. Like convertible notes, SAFEs convert into stock in a future priced round. Unlike convertible notes, they are not debt and do not require the company to pay back the investment with interest.
Convertible notes are promissory notes that serve an additional business purpose other than merely representing debt. Convertible notes include all of the terms of a vanilla promissory note, such as an interest rate and the pledge of underlying security (if applicable).
?Definition? A company may accept a promissory note to exercise compensatory options. Essentially, a promissory note is like giving an ?IOU? to the company instead of paying the company cash for shares. The note may either be a recourse promissory note or non-recourse promissory note.
A promissory note is a form of debt that companies and individuals sometimes use, like loans, to raise money. The issuer, through the notes, promises to return the buyer's funds (principal) and to make fixed interest payments to the buyer in exchange for borrowing the money.
A promissory note is simply a form of debt - like a loan or an IOU - that a company may issue to raise money. An investor typically agrees to loan money to a company in exchange for the company's promise that it will pay back the amount, plus interest, over a specific time period.
Checks, bills of exchange, and promissory notes are all considered negotiable instruments because the person who holds these notes can claim payment provided that they are taken: For consideration.
Here's an example: You sell $1m in convertible notes to an investor with a valuation cap of $10m, and a 30% discount rate. After 18 months, your startup gets a pre-money valuation of $20m, at $20 per share, during a Series A funding.