ACA Members on Convertible Notes and Priced Rounds – The Debate is On!

By: Marianne Hudson, ACA Executive Director

Recently I had the chance to check in with ACA members in detail on their preferred investment structures.  This all started in June at the ACA Pacific Northwest Regional Meeting, attended by more than 200 investors.  One of my favorite sessions was a debate on deal terms, with Angela Jackson of the Portland Seed Fund arguing for convertible notes and Bill Payne of Frontier Angels speaking for priced rounds.  It was a lively discussion and you could tell the audience was into it. 

I thought Angela did a particularly great job of describing the reasons for making first investments via a convertible note and promptly asked her to interview for the column I contribute to  You can see the results of our discussion here.  But I still kept wondering, what does a larger set of angels think about deal structure?  So we did a survey of ACA members, and got a great response.  Let’s just say that there is a considerable debate on this issue!  I summarized this poll in another Forbes column.

Thanks to more than 100 of you who responded to our recent survey on deal terms for first investments.  The survey results revealed:

  • 82% prefer to do priced rounds for their initial investments 
  • 78% had done at least one convertible note in the last 18 months
  • 25% had used convertible notes for more than half of their first investment deals

Even with a continued preference for priced rounds, this shows evolutionary change for sophisticated angel investors.  We also got a window on the changing terms sheets members use:  plenty of us use standard simplified term sheets, but many others are in the mix:  NVCA, SAFEs, Series Seed, and many customized documents. 

You can see member comments, reasons, and experiences with both kinds of deals here.