I wanted to use a convertible
note to raise the first $400K for my company. It meant I wouldn’t have to have the
expense of a formal valuation and it gave me degrees of freedom. Most of the
people I’d be talking to are friends and family, so I wasn’t overly concerned
and didn’t want to give away equity at this stage.
At a party, I was
introduced to a powerful woman who raises equity for companies in Africa. She
was so self-confident and unshakable in her conviction that one only used
equity to fund startups. I listened to her and asked questions. I came away
thinking I was wrong to use a convertible note.
I told others I trusted what
this woman said and they said that a convertible note still made sense and that
I should talk to other people, including people who had used this woman to
I tracked one person down
who was very satisfied with her work. But she had raised $25m for a series A.
She said I should talk to other people who did not have such a good experience
and where the fundraising efforts failed. When I spoke to them I learned this
women took equity even if she failed to raise funds. I also learned she tended
to undervalue the company to make the raise easier.
I went to her and said I
would use her services but that she only got equity if she was successful. She
refused my terms.