TEN Capital Convertible Note & SAFE Note Calculator
Convertible Notes and SAFE Notes are often used to launch a fundraise. In the early stages of the company, it’s difficult to set valuation. The Convertible Note and SAFE Note lets you take funding without going through the valuation process.
A convertible note is a debt instrument that converts to equity later. The TEN Capital Convertible Note Calculator provides the amount of equity a convertible note takes upon conversion.
What determines your Fundability Score?
The company is ready for a fundraise and the key stakeholders, founders, team, current investors, board, etc are all aligned with it.
The introduction pitch deck is ready to go. This is 10-12 slides of non-confidential information about the core business, product, team, fundraise, and outcome. Additional documents include financials, financial pro forma, terms sheet, and diligence documents.
You have a data room setup also called ‘due diligence box’ with the basic documents used by investors in diligence such as entity filings, patent filings, financials, and financial proformas.
You’ve already contacted prospective investors and indicated you are going out for a raise and have received initial feedback.
Your product needs to be usable by customers and have some customer interactions with it. An alpha or beta version is nice but serious traction with investors comes to those who have a product in the market generating revenue.
At a minimum you have someone building it and someone selling it. One of the team members needs to know the domain very well. For example, a life science company needs someone with a deep knowledge of the space. For a consumer product company, you’ll need someone who knows the retail or direct to the consumer distribution channel.
investors look for a large market. Define your market for total available, serviceable, and beachhead market and be able to articulate the size and growth for each one. The total available is anyone who could ever use your product. The serviceable market is the market you are pursuing with your first product. The beachhead is the first twenty prospects you will approach.
If you have users show where they are on the path to buying your product. If you have paying customers show how much they are buying which is often referred to as lifetime value. It’s best to sell some units to demonstrate the product works and customers will pay for it.
If you intend to file patents it’s best to do so before launching your fundraise campaign. Provisional patents are fine for early-stage companies.
It’s important to have an edge on the competition. What gives you a 30% increase in revenue or a decrease in cost? You need to be able to articulate your advantage over the competition.