Every time someone talks about debt v. equity in funding a startup they say that debt is better because it is less paperwork, easier and cheaper. For instance, Carolynn says:
"Financing documents, no matter how streamlined, have a lot of provisions that are complicated and require a not-insignificant amount of time and attention to slog through. Should the investor have a board seat? What protective provisions are appropriate versus onerous? What voting threshold should trigger this drag-along provision? What exactly is a registration right? Startup founders are typically not savvy about financing terms and are thus required to get up to speed at a particularly inconvenient time in the company's lifespan. The purpose of these small checks from seed investors is just to get the company off the ground - do people really want to worry about what a "deemed issuance of Additional Shares of Common Stock" is at this point in time?"
So equity docs are more expensive than debt because they're more complicated. And they're more complicated because they have all these provisions and protections that debt docs don't. But if you created equity docs that didn't have all these provisions, wouldn't they be pretty much as simple as debt docs?
A typical equity deal has these docs: 1. A stock purchase agreement--17 pages, 13 of which are reps and warranties, and closing conditions, things that debt docs usually don't have; 2. A Voting agreement, protections that debt docs don't have; 3. An Investors Rights Agreement, protections that debt docs don't have; 4. A Restated Certificate of Incorporation, protections that debt docs don't have along with changes that debt docs also need to make (increase authorized shares).
So if you took out all the stuff that debt docs don't give investors anyway, you have a 4 page stock purchase agreement. Compared to a 8 page convertible note. (I didn't count signature pages in either doc.)
This is an honest question, I assume there is a reason, I just don't know what it is.