Short answer: we typically see these falling between 4–8% annual interest on a convertible note.
But here’s the thing, investors usually aren’t in it for the interest. The rate is there mostly as a formality. What they really care about are the conversion terms (like discount and valuation cap), because that’s where their upside comes from. Interest in the case of a convertible debt is like the consolation prize "sorry this didn't work out, here's a little something for you sonny boy!"
So don’t stress too much on the rate. IF the investor is really caught up in that, I'd be a little concerned about their sophistication level. If you’re in that 4–8% sweet spot, you’re likely fine.
And again, if investors are pushing for more, it’s usually a signal they care more about risk than upside. That’s something to dig into and a solid orange flag for me, that in the right light, is probably red ;).
Short answer: we typically see these falling between 4–8% annual interest on a convertible note.
But here’s the thing, investors usually aren’t in it for the interest. The rate is there mostly as a formality. What they really care about are the conversion terms (like discount and valuation cap), because that’s where their upside comes from. Interest in the case of a convertible debt is like the consolation prize "sorry this didn't work out, here's a little something for you sonny boy!"
So don’t stress too much on the rate. IF the investor is really caught up in that, I'd be a little concerned about their sophistication level. If you’re in that 4–8% sweet spot, you’re likely fine.
And again, if investors are pushing for more, it’s usually a signal they care more about risk than upside. That’s something to dig into and a solid orange flag for me, that in the right light, is probably red ;).