OLNS#2 – Convertible Loans for Tech Companies

Orrick Legal Ninja Series | September.10.2019

Due to their flexibility and reduced complexity compared to fully-fledged equity financings, convertible loans are an important part of a startup's financing tool box. In a nutshell: a convertible loan is generally not meant to be repaid, but to be converted into an equity participation in the startup at a later stage.

Orrick Legal Ninja Series #2 OLNS#2 is filled with practical tips for founders and investors alike and comprehensively presents all the essentials you need to know about convertible loans, including:

  • Advantages and Disadvantages of a Convertible Loan Financing
  • Material Terms and Conditions of a Convertible Loan Agreement and Drafting Tips
  • Convertible Loans and Notarization
  • Tax Considerations (Germany)
  • Public Subsidy Programs for Convertible Loan Agreements
  • SAFEs

Convertible loans belong to the group of mezzanine or hybrid financing instruments and are generally not tied to certain stages of the life circle of the startup as borrower. Convertible loans must be distinguished from convertible bonds and venture debt financings, the latter of which are described comprehensively in our OLNS#1 Venture Debt for Tech Companies.

In preparing this second issue of the OLNS, our international and cross-functional Orrick team again drew on our experience representing more than 2,600 tech companies globally, as well as the world’s leading venture and private equity investors. Founded in the Bay Area, Orrick is one of the world’s leading technology law firms, ranks #1 for European venture capital transactions (PitchBook), and has been nominated for the JUVE Award “Law Firm of the Year for Private Equity and Venture Capital” (2019).

You can find an overview of our German Technology Transactions practice, including recent transactions and further publications, here.