In case there is a sale of the company before the conversion to equity, the investor can choose to get 2 times the total investment or convert at the valuation cap. As mentioned above as well, a KISS convertible note has an 18-month maturity date, so if at least 1M equity financing does not take place by the maturity date, the KISS holder can easily elect to convert at the valuation cap by majority vote. The discount or valuation cap would have to be negotiated on a deal-by-deal basis. The automatic conversion to preferred stock takes place when the company raises a qualifying priced round. It offers downside protection in the event where the company does a “down round” or otherwise offers more favorable terms to the other investors in the future.īasically, a KISS converts when the company raises at least $1 million in equity financing. And at this time, there is a huge amount of risk as the company hasn’t taken off yet and there is no way to know if the company will be successful or not. KISS investors normally invest in a company in its early stages. This lets the investor get better securities in the future if issued by the company. Moreover, unlike a SAFE, the KISS convertible note has an MFN clause.
KEEP IT SIMPLE SERIES
In short, it accrues interest at a rate of 5% and has a maturity date of 18 months after which the investor can convert the underlying investment amount along with the interest into a newly created series of preferred stock of the company.
Unlike SAFEs, a KISS is more like a convertible note and is very similar to the classical model of a convertible note. It’s simple while still including all of the necessary features that are both balanced from the investor’s and company’s standpoint. This KISS note template has been created to be flexible without being overly customizable. The KISS convertible note is a short and sweet “open source” document that was drafted after discussions with many Silicon Valley law firms and early-stage investors. In short, to keep convertible equity financings simple and quick, 500Startups created the KISS note template. Its purpose is to allow startup companies to get financing within a short time and at a low cost while they avoid the long process of negotiations when creating a grant agreement by an investor. It contains a lot of similarities with SAFE convertible notes. What is a KISS or Keep It Simple Security?ĭuring July 2014, 500Startups announced the birth of the KISS convertible note, which is an alternative investment vehicle to a SAFE instrument.
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