Convertible Round
What is it?
- Convertible is an unpriced bridge round before a priced round such as Series A or B.
- Company issues compulsorily convertible notes, which convert to preferred shares the next priced round at a pre-determined valuation cap. Convertibles can be uncapped, and may contain discount clause i.e. conversion at a lower price than the next priced round’s valuation.
What to expect?
- Convertibles are generally treated as debt with a fixed maturity date (12-24 months) and a very low coupon, usually 1% or less.
- Company is required to complete a priced round before the maturity date and raise a minimum amount of funds.
- There is no limit to how many convertibles a company can issue. Each convertible can have different terms and conditions.
- Easier execution and simpler paperwork compared to a priced round.
- Convertibles do not carry any voting rights but usually have the same information rights as existing investors.
Who should consider
- Companies seeking growth capital but don’t want to go through a priced round because of valuation concerns or the greater effort required to go through a priced round.
- Convertible round size is usually much smaller than a priced round, hence it is an opportunistic fundraising instrument.
How Can Bayfront Help
Strategy Review
Detailed analysis of the Client and advise on value-adding corporate strategies.
Competitive Benchmarking
Detailed analysis of the Client and benchmark them against Industry standards.
Structuring
Detailed analysis of the Client’s capital structure and advise on the optimal proportion of equity and debt.
Deal Execution Management
Assisting in execution of deal processes, most commonly in the form of capital raising.
Valuation
Helping to navigate through the complexities of transaction, improve transaction execution, and increase the chance of success.
Information Memorandum
For presenting to different target audience such as lenders, new sales relationships, new client relationships.
Governance Review
To determine the specific governance needs of a company and assist in areas which would minimize risks and help achieve business goals.