Creating a Convertible Note

Introduction

This article will walk you through the process of generating a Convertible Note (or Bridge Note). See this article to learn more about Convertible Notes and how they work. If you have a Convertible Note that was executed outside of the platform, follow the steps in this article to Upload a Convertible Note.

This workflow is broken up into two parts: defining the Convertible Note Terms, and Convertible Note Purchase Agreement. As you continue through the workflow, any generated or uploaded documents will display in the documents panel on the left of the workflow.

Click the links below to jump to that section of the article:

Part 1: Convertible Note Terms

Let's Get Started

From the Company workspace, go to Start New Workflow > Financing > Convertible Note. The workflow will lead you through the process of creating the documents and obtaining necessary approvals to complete the financing.

A term sheet will be created as part of the workflow and circulated for approval before executing the note(s). If you wish to forego this approval step, uncheck this box. If you are unsure, you can check with your legal counsel. When ready, click Continue.

Comply with Securities Law

You will be asked to confirm compliance with securities laws. If you're unsure which option to choose, we recommend consulting with your attorney. You can learn more about Accredited Investor Requirements on our blog. Click Continue to move forward.

Select Terms

Enter the terms which will be used in the financing documents.

Click Select Additional Terms if there are additional terms that need to be set. Otherwise, click Continue.

Add Purchasers (for Term Sheet Approval)

The following steps will only display if you selected to Require Separate Term Sheet Approval. If you unchecked that option, you can skip this step.

Click Add Investor to add a purchaser. Enter their name, selecting to create a new user if applicable, and the loan amount. You can also check to allow the investor to specify the amount.

Repeat this step until all purchasers have been added. If necessary, you can edit or delete investors before clicking Continue.

Consult Counsel

Before continuing, the workflow will prompt you to check with your legal counsel if stockholder approval is needed in order to issue the convertible notes. If necessary, you can generate the approval in the platform.

Compose Email

Review and customize the email that is sent out to your investors. Check if you want to receive a copy of the email when sent out.

Review Drafts

Here you can review drafts of the generated documents. Click Edit Document to make changes or click PDF to download a copy of the document.

Request Approval

Select how you would like to obtain the necessary approvals. You can generate a consent using our templates, upload your own drafted consent forms to be sent out for signature, opt to run the consent in a separate workflow, or if the approval has already happened you can upload the executed documents.

Checkpoint

The documents listed will be sent out for review and signature. Take time to review the documents, and make any necessary changes before continuing. You can also opt to send the documents to your legal counsel for review, or edit the email that is sent out as part of the execution of the note(s).

Wait for Approvals

The workflow will send emails to obtain the necessary approvals. The workflow will show the status of any pending approvals. Once all approvals have been obtained, you can continue to Part 2 of the workflow. See this article for additional information on using Private Shares to generate board approvals.

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Part 2: Convertible Note Purchase Agreement

Review Document

If you selected to Require Separate Term Sheet Approval in Part 1, the generated documents will be listed. Review and edit the documents if necessary before continuing. If you did not require the separate approval, skip to the next step.

Prepare Disclosure Schedule

Add or upload information relevant for the Disclosure Schedules to the Note Purchase Agreement. We recommend reviewing the Representations and Warranties from the Note Purchase Agreement with your attorney, as they can work with you to determine what information, if any, should be disclosed.

To add notes or an additional document, click the arrow to expand the section. To add a note, enter the text of the note and click Save. To add a document, click Add Document to upload a document or select one from your Data Room.

Add Purchasers

If you selected to Require Separate Term Sheet Approval in Part 1, those purchasers will display. If you do not need to add any additional purchasers you can continue forward to the next step.

Click Add Investor to add purchasers. Enter their name, selecting to create a new user if applicable, and the loan amount. You can also check to allow the investor to specify the amount.

Repeat this step until all purchasers have been added. If necessary, you can edit or delete investors before clicking Continue.

Upload Subordination Agreement Forms

Click Add Document to upload any Forms of Subordination Agreements. The documents uploaded here will be included for signature by the noteholders.

Provide Evidence of Good Standing

Click Document Options to upload your Certificate of Good Standing, select the effective date, and check the box to certify your company is in good standing.

Closing Deliverables

A summary of the execution and closing of the convertible notes will display.

Enter Wire Information

Enter your bank information. This will be shared with the purchasers so they know where to send their funds.