Convertible Notes: The Debate Continues

Convertible notes can add flexibility for many angels, as I wrote last week. I really like how Angela Jackson thinks about these deal terms for first investments in startups, but it also got me wondering: are angels still debating notes and priced rounds? I did a quick poll of angels, and boy did I get an earful. It’s safe to say the debate is on! Last week more than 100 members of the Angel Capital Association (ACA) responded to the survey. While not a scientific sample, it provides solid market representation since respondents were angels from across the US and Canada and invest in similar sectors and stages as the full ACA membership. Here’s what I found out: 82% prefer to do priced rounds for their initial investments BUT 78% had done at least one convertible note in the last 18 months AND 25% used convertible notes for more than half of their first investment deals