onvertible note is a loan that automatically converts into equity upon

There has been no shortage of controversy and criticism around the convertible note, a popular investing vehicle that’s used by seed stage and angel investors. As a refresher, a convertible note is a loan that automatically converts into equity upon the closing of a Series A round of financing. Sometimes these loans have a valuation cap and/or a discount. Although these types of notes are relatively easy and cheap to form, many have argued that these types of vehicles are not startup-friendly for a variety of reasons, which we’ll explain below. Today, TheFunded.com and the Founder Institute is announcing in conjunction with law firm Wilson Sonsini, Convertible Equity, a startup-friendly seed-financing vehicle intended to replace Convertible Debt notes.

TheFunded.com and the Founder Institute founder Adeo Ressi tells us that the Convertible Equity vehicle provides a fast, cheap and flexible way for angel investors to invest money in a startup, that converts to equity at the time of a future round. The point, he says, is to avoid time-consuming valuation negotiations and allowing a variable amount of capital to be raised