If done correctly, convertible bonds are a simple and effective way to close a financing cycle, as they have limited rights and carry some more complex negotiations back to the (larger) price cycle. Lately, however, convergent financing has become increasingly complicated, with companies pushing for complex conversion scenarios and a plethora of functions. This complexity increases legal costs (for businesses and investors) and extends the time it takes to close financial statements. In recent years, convertible bonds have become one of the most popular methods of obtaining financing. Although some VCs and investors do not always like to use converts, they are an extremely common and frequent form of legal structure in the United States and especially in Silicon Valley. Because convertible bonds are generally simpler and less expensive than a more formal pricing cycle, many founders and investors use them to “fill” a business until larger, more traditional financing occurs. In July 2014, 500startups announced the birth of the KISS convertible bond, which is an alternative investment vehicle to a SAFE instrument. It contains many similarities to SAFE change notes. Its goal is to enable start-ups to obtain financing in a short time and at a low cost, while avoiding the lengthy negotiation process when creating a grant agreement by an investor. SAFE is known to be safe, as there are no exploding clauses that can wipe out the business. The conditions are so tight that Y Combinator has indeed had to enter into four separate contracts to avoid complex introductions: these four types of SAFE are extremely simplistic agreements and they favour the company at the expense of the investor. In order to quickly and easily maintain equity-convertible financing, 500 startups have produced KISS` legal documents.
The KISS documents are short, soft”open source documents, written following several interviews with several Silicon Valley law firms and early investors. They are designed to be flexible, without being overly customizable, including simply and at the same time all the necessary and balanced functions from both the company and the investor`s point of view. We have provided two variants of KISS to meet the most common convert financing structures we see today, as well as a summary of the main terms: As a flexible, security document with no many conditions to negotiate, security companies save money and investors in legal fees and reduce the time spent negotiating investment terms. Startups and investors generally have only one point to negotiate: the valuation cap. Since a safe does not have an expiry date or maturity date, no time or money should be spent on extending maturities, reviewing interest rates or otherwise. All the details have been added, as in the picture. Some fields are not visible at first. However, if you add the details in accordance with the agreement, the fields will be displayed. You must complete the following details: There are two types of KISS convertible bonds that you can use depending on the type of agreement you have with the investor. In both cases, it is the KISS-Note debt version and the equity version KISS Convertible Note. To explain it, we are pleased to announce a totally unsylug, but super useful, series of legal documents for founders and investors who are affectionately called KISS (“Keep It Simple Security”).
While ordinary people are likely to completely ignore this upsetting news and go back to see the World Cup, founders and investors should probably interrupt the game for 5 minutes and keep reading. And this simple example shows how round modeling can help you recognize the effect of the KISS change note on company ownership when transformed. This financial stool becomes more useful in p scenarios