As a follow up to the two-page plain English Seedrs Term Sheet we launched earlier this year, we now have a version of the document for convertible equity campaigns. We believe that raising capital should be transparent and simple – including nuanced fundraising structures like convertible equity.
Seedrs convertible investments use exactly the same nominee structure, and go through exactly the same due diligence process, as Seedrs equity investments. For more information on the structure and due diligence process, please see our Term Sheet for equity investments.
Because Seedrs convertibles are a different type of investment to standard Seedrs equity, the investment process and documentation are a bit different. Our convertible equity term sheet summarises the differences between convertible and “normal” equity investments and sets out the key terms of the documentation.
For later stage companies which are between fundraising rounds, convertible equity campaigns serve as a useful way of raising bridge finance. You don’t need to establish a valuation at the time of the convertible (which avoids affecting discussions with potential investors in the next round).
Convertible equity on Seedrs is very similar to regular equity crowdfunding on Seedrs, but rather than shares being issued as soon as the investment in the company is made, shares are issued at a later date. Effectively investors are pre-paying for their shares. Unlike traditional convertible notes the Seedrs convertible does not contain a loan element, and there are no interest payments or a repayment requirement.
In return for pre-paying for the shares of a company, an investor is given a discount on the price of the shares issued on “conversion” of their investment. This means they get more shares for their money. When the time comes, investors’ pre-payments convert to shares in the company.
View and download the Seedrs Convertible Term Sheet (Right click to download the PDF).
As always, we’d love to hear your feedback and thoughts on how we can make things simpler and clearer for everyone involved in buying into businesses and sharing in their success.