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A convertible note cap table is a useful financial tool that many entrepreneurs use in their ventures. If you are thinking about venturing into the business world there is no doubt that you will need capital. You may be able to get venture capital from friends and family or from someone else that has a lot of money that they are willing to lend you. Many investors base their venture capital on the ability of your company to turn a profit. In order to do this, you will have to convince a potential investor that your business idea is a sure hit. If you are unable to do this you will find yourself out of business and out of luck as far as securing any kind of venture capital goes.

One way to do this is to create a convertible notes group that is made up of all of the venture capital investors that are in on the ground floor with you. These are people that are extremely wealthy, have been at it for a long time, and are willing to give you some really good money just because. They are not just out there to make money though, they really want to see a return on their investment and they really are willing to put their ego on the line to do so. The other nice thing about convertible notes is that they help to diversify your portfolio, which can sometimes be difficult if you only have venture capital coming in with you. This way you are less likely to lose all of your money in one catastrophic funding event. This is why it is important to have convertible notes when you are starting your business.

There is also a very clever way to use the convertible note cap table in your advantage. When you are working with a group of convertible notes and you want to sell them all off to investors you will want to create a hierarchy. You should create two teams of note investors that work together to purchase the convertible notes from you. The key to doing this is by setting up a team Captain that is in charge of negotiating the deals between the various note investors. The team captain should be experienced enough to know when it is time to sell the notes to investors, and when it is best for him or her to hold on to the notes instead of giving them away.

As the team captain and the other investors start negotiating the deal the Captain has an opportunity to negotiate a “conversion” to a deferred capital note conversion. What we are talking about here is converting the accumulated interest into cash. In order to do this the convertible note must have the next round of accrued interest. If this is the case then the team Captain should make a deal with the convertible note investors to make them agree to give the accrued interest a discount, in exchange for a note of purchase from the company. This is how you turn your accumulated note into cash.

At this point you may be wondering where you go from here. The next round of negotiations is going to be much more intense than the first round. startups want to do is think about how you can take advantage of this discount and convert your convertible notes into cash. There are several things you can do, such as selling them all to one group that will purchase all of their shares of accrued interest. Or you can also receive cash from the sale of the convertible notes, or from the purchase of the notes of other investors. The choice is yours.