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Angel Capital Association's New Model Convertible Promissory Note: Key Features and Alternative Provisions

Streamlining the Use of Convertible Notes in Early-Stage Financing; Balancing the Interests of Issuers and Investors

A live 90-minute premium CLE video webinar with interactive Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Tuesday, May 6, 2025 (in 13 days)

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

or call 1-800-926-7926
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This CLE webinar will discuss the key features and additions of the Angel Capital Association's (ACA) new Model Convertible Promissory Note (Model Note). The panel will engage in a mock negotiation highlighting the Model Note's usefulness in practice and provide guidance on when alternative provisions may come into play in a particular transaction.

Description

In response to the significant increase in the use of convertible instruments for early-stage financing, the ACA created a new Model Note in an all-in-one document that combines common convertible promissory note features with "best practice" provisions often found in side letters or note purchase agreements and includes alternative provisions for consideration. The Model Note, along with the accompanying Model Note Term Sheet, aims to streamline the use of convertible notes in early-stage financing and endeavors to balance the rights of founders and investors. The new Model Note has the potential to boost early-stage investment by reducing confusion between the parties, setting achievable expectations, and encouraging transparency, thereby making transactions more efficient and cost-effective.

The Model Note incorporates provisions for conversion into equity and outlines the typical provisions for conversion, including a discount to the next round and valuation cap. The key features of the new Model Note include various optional provisions such as expanded representations and warranties, participation rights in future financings, select information rights, most favored nation rights, board observer rights, and protective provisions.

Listen as our expert panel, who were members of the task force that drafted the Model Note, reviews the Model Note's key features and structures and highlights its usefulness in the early stage venture capital ecosystem.

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Outline

  1. Background: why ACA created the new Model Note
  2. ACA's new Model Note vs. SAFEs and the National Venture Capital Association's forms
  3. Structure of the new Model Note and the issues it addresses
  4. Key features and additions of the new Model Note
  5. Alternative provisions to consider
  6. Practitioner pointers and key takeaways

Benefits

The panel will address these and other key considerations:

  • What were the goals of ACA's task force when creating the new Model Note?
  • What are the key features and additions of the new Model Note?
  • How is the Model Note structured and what issues does it address?
  • What are the alternative provisions to consider in the Model Note and under what circumstances should they be used?
  • How does the new Model Note balance the interests of both founders and investors?
  • How recent case law has influenced the provisions of the Model Note

Faculty

Futter , Dror
Dror Futter
Senior Counsel
Touro University

Mr. Futter is the Senior Counsel to the President of Touro University. Previously he was a venture...  |  Read More

Sigety, Elizabeth
Elizabeth D. Sigety
Partner & Chair, National Emerging Companies & Venture Capital Practice
Fox Rothschild

As an attorney practicing finance and franchise law in Pennsylvania and New York including a strong presence in the New...  |  Read More

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