Welcome back to startup basics. I am here with my friend Becky Gagra

from Wilson Suncini. Their domain name is W.SGR.com. They are one of the top law firms in the history of the Silicon Valley. They represented everybody

from Apple to Google. They incorporated Google. They did the incorporation Google document,

so you don't need to know anything else.

And we're talking about basic things

that you could screw up as a first-time founder.

And I love doing this series.

I do it every 10 years or so on the pod and I do it with

Wilson's since they're my friends and they teach me a lot and these things do

change the thing I want to talk about is financing structures because that is something.

Maybe corporate structure, maybe term sheets, they've changed a bit, but nothing has changed more than financial structures.

We got safes, we got convertible notes,

we got price rounds.

Just walk us through what each one of those are and what are the broad strokes, pros and cons.

Yeah, happy to. So I'm going to start with convertible notes.

My favorite.

These were really created as a faster, cheaper alternative to doing an equity round.

The expectation is that the notes are going to convert into shares of preferred stock in the next round rather than actually be repaid.

It's not nobody takes out a convertible note with the expectation of I want to get my money back.

They really want to

convert into shares in the future. So while the convertible note is

outstanding, it is a debt instrument, so it does not show up on the cap table.

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