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What’s the average cap on seed round convertible note financing?

Research on convertible note terms conducted by Silicon Legal and published in Alley Watch reveals the following averages:

AVERAGE CONVERTIBLE NOTE TERMS

  • $7MM median valuation cap (vs. $6MM last year)
  • $950K median dollars raised (50 percent over $1MM; 25 percent $500K-$1MM; 25 percent under $500K)
  • 84 percent with a term of 12 to 24 months
  • 65 percent with an interest rate of 4-8 percent
  • 65 percent with a 20 percent valuation discount to the next round
  • 84 percent automatically convert to equity at time of an acquisition
  • 78 percent have no change in control premiums (but 20 percent did for up to 2x)
  • 68 percent allow for conversion to equity at time of maturity
  • 25 percent allowed for pre-emptive pro rata investment rights
  • 15 percent allowed for most favored nation revisions (if any future rounds at better terms)
  • They typically no longer come with warrant coverage for additional equity
  • There are no veto rights offered on any change in control scenarios
  • These notes do not typically secure the assets of the company or its founders
  • These notes typically do not come with board seats

For the SAFE structure, they were typically $500K in size at a median $5MM valuation cap (including a 20 percent discount to the next round) and included pro-rata pre-emptive rights and change in control protection (at a zero to 100 percent premium).

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