Equity versus Convertible Notes: Key Differences in Funding Structures

Jason Lemkin analyzes the practical differences between raising $1M via convertible notes at a $10M cap versus a priced equity round, focusing on founder control, investor certainty, and deal complexity. He recommends convertible notes for sub-$800K rounds but advocates for equity rounds with board representation for larger institutional investments. The article emphasizes that while notes offer faster execution and less dilution, they create ambiguity about what investors are actually purchasing.