Convertible Promissory Notes
Note converts to membership interest or equivalent common stock when the company raises $1,500,000 in a qualified equity financing
Maturity Date: 10/15/2019
$6,000,000 Valuation Cap
18% Discount Rate
10% Annual Interest Rate
*Annual Interest Rate subject to adjustment 10% bonus for StartEngine shareholders. See 10% Bonus below
Maximum ($107,000) of Convertible Promissory Notes
Minimum ($10,000) of Convertible Promissory Notes
|Company||Sharebert Holdings LLC|
|Corporate Address||222 Broadway, New York, New York|
|Description of Business||Mobile commerce / Marketing technology|
|Type of Security Offered||Convertible Note|
|Minimum Investment Amount (per investor) ||$150|
What is a Convertible Note?
A convertible note is short-term debt that converts into equity. Convertible notes are structured as loans with the intention of converting to equity. The outstanding balance of the loan is automatically converted to equity at a specific milestone, often at the greater valuation of a later funding round.
Why do startups raise investment capital using convertible notes?
Convertible notes (or “notes”) offer a simple, cheap, and fast method for startup funding as compared to traditional priced equity rounds. It also defers the more complex discussion of startup valuation to the next round of financing.
What does the maturity date indicate on a convertible note?
The maturity date of a note indicates the date when the note is due to be repaid to the investor along with any accrued interest, if it has not yet converted to equity.
In practice, in most situations, startup investors will not call for a note to be repaid at the maturity date, and will instead amend the note to extend the note’s maturity date, typically for a period of another year.
What is a cap in a convertible note?
A convertible note cap sets the maximum valuation at which the investment made via the convertible note can convert into equity. Investors in the convertible note typically get converted at the lesser of the valuation of the next qualified priced round and the cap.
What does the interest rate indicate on a convertible note?
The interest rate of a convertible note indicates how much interest accrues to the investor prior to the note’s conversion to equity or its repayment as cash when called.
On the west coast in the US, typical interest rates on most convertible notes are a nominal 2% (and cannot legally be lower or they might not be viewed as a convertible debt instrument). Elsewhere in the US, typical interest rates on most convertible notes range from 4-8%.
For example, with an interest rate of 8%, $100 invested on day 0 would convert as if $108 had been invested on day 365, if conversion happens on day 365.
From an investor standpoint, the interest rate term is not as impactful to startup returns as picking the right startups to fund, and as other convertible note terms such as the conversion cap and/or discount rate.
What happens to a convertible note if a company shuts down and goes out of business?
As holders of a debt instrument, holders of convertible notes come ahead of holders of equity in terms of repayment of any remaining assets they may have a claim to during liquidation. In concept, the holder of a convertible note will be paid ahead of all equity holders.
What happens to a convertible note if a company is acquired or merges with another company?
If a company is acquired or merges before a convertible note converts, the specifics of what a noteholder receives will depend on the specifics of their convertible note terms. The most company friendly terms call for the note to be repaid with interest to the investor. Most convertible notes call for the note to be converted to common shares in the company at a pre-set price just before the acquisition/merger, often at the same price as the cap of the note. Still others call for the noteholders to be paid back their principal investment plus interest, plus a premium amount, generally 0.25-1.5x of principal.
Does a convertible note holder have a choice about converting a note in an equity financing round?
The terms of conversion are usually listed in the convertible note. Typically, conversion to equity is automatic at the next equity raise, but may be conditional on a round meeting certain thresholds such as a minimum round size.
All investors will receive a Sharebert T-Shirt & 250 rewards points for their account.
If you invest $500, any fees for application to sell on Sharebert will be waived and you will take priority as a Sharebert seller, you will receive access to select Sharebert Events and our ever-loving affection.
If you invest $2,500, any fees for application to sell on Sharebert will be waived and you will take priority as a Sharebert seller, you will receive access to all VIP Sharebert Events, and unlimited access to all Sharebert discounts with partner brands.
If you invest $25,000, any fees for application to sell on Sharebert will be waived and you will be automatically approved as a Sharebert seller, you will receive an invitation to quarterly Executive Board Meetings in NYC, and access to all VIP Sharebert Events, plus everything above.
If you invest $100,000, any fees for application to sell on Sharebert will be waived and your brand will be featured on the Sharebert homepage, you will receive unlimited access to internal company chat during daily operations (we're all about transparency), invitation to quarterly Executive Board Meetings in NYC, listing on Sharebert website as Partner, and access to all VIP Sharebert Events, plus everything above.
*All perks occur after the offering is completed.
*Annual Interest Rate subject to adjustment 10% bonus for StartEngine shareholders. See 10% Bonus below.
The 10% Bonus for StartEngine Shareholders
Sharebert Holdings LLC will offer a 10% bonus on the annual interest rate for all investments that are committed by StartEngine Crowdfunding Inc. shareholders (with ≥ $1,000 invested in the StartEngine Reg A+ campaign) within 24 hours of this offering going live.
StartEngine shareholders who have invested $1,000+ in the StartEngine Reg A+ campaign will receive a 10% increase in the annual interest rate on Convertible Promissory Notes in this Offering if they invest within a 24-hour window of their campaign launch date. For example, if invest in the first 24 hours, your annual interest rate will be 11% instead of 10%.
This 10% Bonus is only valid for one year from the time StartEngine Crowdfunding Inc. investors receive their countersigned StartEngine Crowdfunding Inc. subscription agreement.
The Company might incur Irregular Use of Proceeds that may include but are not limited to the following over $10,000: Vendor payments and salary made to one's self, a friend or relative; Any expense labeled "Administration Expenses" that is not strictly for administrative purposes; Any expense labeled "Travel and Entertainment"; Any expense that is for the purposes of inter-company debt or back payments.
A crowdfunding investment involves risk. You should not invest any funds in this offering unless you can afford to lose your entire investment. In making an investment decision, investors must rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved. These securities have not been recommended or approved by any federal or state securities commission or regulatory authority. Furthermore, these authorities have not passed upon the accuracy or adequacy of this document. The U.S. Securities and Exchange Commission does not pass upon the merits of any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering document or literature. These securities are offered under an exemption from registration; however, the U.S. Securities and Exchange Commission has not made an independent determination that these securities are exempt from registration.