Anyone know when the debt comes due, what the interest rate is, and if payback terms are pegged to cashflow somehow?
Even more interesting: that $5M cap also applies if the terms of the future equity round don't allow for re-upping. So basically, if StartFund can't re-invest in the next round, they get better terms on the note. Really smart.
a) At some point you would do a real valuation on your company and debt would be converted to shares or some type of equity. Investors would hope that you become profitable and investors could sell shares on secondary market or company would eventually buy back shares.
b) If no cash you would eventually close shop, and I imagine if you dissolve your corporation nothing happens. Like going bankrupt and if you have no money theres nothing to collect on and nothing happens. I guess its possible to sell what assets are available.
Thats why investment is a risk.