Last version published: 21/06/2017 14:32
Publication number: ELQ-59928-3
View all versions & Certificate
Convertible Loan Note: Guidance for Startup Founders
The accelerator program's standard template for CLN
(This post was originally published at sosv.com)
On a yearly basis, SOSV invests into 200 companies whose investments vary greatly, given the differences in location, stage of investment, the amount of needed capital, and other related key factors.
However, a very common way for early stage companies to raise finance is via convertible debt- a prevalent format in the US.
(A discussion on debt and CLN is available on the methodology below.)
I regularly come across many of these instruments, all with different characteristics and clauses that may either be suited to the company or the investors themselves.
Here at SOSV, we developed a new type of CLN called “SAFER”. It includes a “trigger”- A trigger is a situation where the company has a CLN financing round and raises a surplus of money, where the round then automatically becomes a “priced round”- ie. An equity financing instead of debt.
The advantage of this is that the price per share will be secured for the firm, in turn providing certainty to the founders on the impact of dilution given the capital raised.
It is suggested that founders consider such an approach if they need considerable amounts of capital.
Generally is a word you will come across a lot on the methodology. This is given that each CLN needs to be adapted to properly portray the agreed-upon terms of the financing- a “one size fits all” format could be detrimental for founders in the long run!
You may download the SOSV accelerator Program standard CLN, as well as the available methodology, below.
Do keep in mind that this Word file will only provide an overview of the headline terms of the CLN. The file is for guidance purposes, thus we recommend founders to obtain their own independent legal advice for their CLN round.
-Maria O'Brien of SOSV
This business tool includes
1 Word File, 1 Online Methodology
SOSV offers you this business tool for free!
download for free
Add to bookmarks
- No review yet!
People using this tool also downloaded
Startup Cap Table Excel TemplateA fully customizable excel cap table template for startups of all stages to use when raising capitalinvestorsfundraisingventure capitalraising capitalseedseries acap tableseries bseries c1,167 remove_red_eye
Note Discount Cap WorksheetDiscount or cap? A spreadsheet that shows what happens when a note converts.financevaluationdiscountventure capitalraising capitalseries aoption poolcapconvertible noteterms245 remove_red_eyefreeby Raji Bedi
How to Raise Capital: A Guide to Seed FundraisingWhat startup founders must know about raising seed funds to get their startups off the ground.fundraisingstartupsraising capitalseed fundraising1,263 remove_red_eyefreeby Geoff Ralston
Startup Executive Summary TemplateExplain your firm's main features in one page, to maximise your chance of raising funds.fundraisingstartupsraising capitalexecutive summary431 remove_red_eyefreeby Pejman Makhfi
The Best Company Pitch Evaluation SheetEvaluation sheet for a company pitch deck that can be used by investors or judges of pitch competitions.investorsventure capitalraising capitalpitch deckevaluation sheetjudgesbusiness angels633 remove_red_eye
Cap Table TemplateThis Cap Table template perfect for first-time entrepreneurs to list a company's securities.financestartupinvestorsventure capitalraising capitalcap tableshareholdersfounderscontrol694 remove_red_eye
S3's Operating Model TemplatePrecise calculator for business expenses, overall cash needs and revenue model.financestartupsearly-stageventure capitalraising capitaloperationsbusiness expensesrevenue modelbusiness kpiscash needs1,386 remove_red_eyefreeby S3 Ventures
Liquidation Model - Waterfall AnalysisEducate employees, founders, and others in how liquidation preferences affect financial distribution in exit scenariosfinancestartupsventure capitalraising capitalliquidation preferencesfinancial distributionventuresexitsliquidation modelwaterfall analysis2,226 remove_red_eye
VC Venture Capital Term Sheet Template - NVCA ModelA Series A Preferred Stock VC Term Sheet Templatefundraisingstartupsventure capitalseries ainvestingterm sheetpreferred stock579 remove_red_eyefreeby NVCA
Startup Financial Model TemplateA simple financial model for an early-stage startup/anyone building a model for a companyfinancefinancial modelentrepreneurshipstartupsearly-stageend-to-endstandard financial statementsventure capitalkey operating metricsraising capital4,392 remove_red_eyefreeby David Teten
Any questions on Convertible Loan Note: Guidance For Startup Founders?
The user community and author are here to help. Go ahead!