Dear friend of MedVector,
As you may know, MedVector is raising money again on StartEngine to give our friends and family another opportunity to own a piece before our valuations go through the roof. Imagine if you could have invested early in Uber, Home Depot, Facebook, Target, or something similar...
While a 50% return would be considered impressive for traditional investing, investing in a startup differs. While it is a higher risk, the returns can be huge. For example, if MedVector grows as anticipated, a $10,000 investment today could equal more than $1.3m in the future (including dilution). Please, invest responsibly knowing this is still a high-risk investment, but this potential outcome is very real. The value has already doubled for our original StartEngine investors since 2021.
What is a Convertible Note?
One way investors protect themselves is by investing through a “convertible note.” Typically the amount of shares an investor purchases is based on the company's valuation (the higher the valuation the fewer shares). With a startup like MedVector, traditional valuations are harder to pinpoint, so a convertible note protects investors from buying shares at the wrong valuation. Then, once a valuation is triggered the shares are “converted” with some advantages to the investors.
There are 3 components to most convertible notes; Interest, Discount, and CAP. Below I will explain the parts separately and how they protect the investor. (Note: The below is an example and not MedVector’s terms. You can find our terms on the MedVector landing page on StartEngine.
Company X
Interest: 5%
Discount: 10%
CAP: $30m
Interest:
A convertible note with 5% interest will give the investor 5% more money than they invested. For example, $10,000 invested with 5% interest will give the investor an extra $500 in shares at conversion. This is usually annualized, so the longer it takes to convert, the more interest accumulates.
Discount:
The discount “discounts” the valuation at conversion. The idea is to reward the convertible note holders for getting in early while protecting them from the downside. If the valuation comes in lower than anticipated, investors are still rewarded for being an early investor. For example, if a startup has a triggered valuation of $20m with a 10% discount, the convertible note holders would be converted at $18m giving them more shares.
CAP:
To protect investors from runaway valuations, convertible note holders have a maximum valuation for conversion. If a startup takes off quickly to a $100m valuation, the convertible note holders would be protected to the upside by the CAP. Instead of converting at $100m, they would convert at $30m (meaning they would get more than 3x the shares and instantly benefit from the $30m to $100m growth).
Cheers, Dennis Patterson, CoFounder
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7moTiming the entry. Timing product launches. Timing key announcements. Timing fundraising. Timing acquisitions. Timing hiring. Timing the exit. So may opportunities to pick the wrong timing. All you can do is your best, work towards solid goals, make sure you have a grasp of your ICP and the market around you, and deliver.