I Put $100k into My Startup and Now I Want to Raise Capital from VCs — Should I Treat this $100k as a Loan? What’s Fair?

If your startup is really hot, investors probably won’t object to having your $100k treated as a loan. However, most investors don’t like the idea of their capital going to payback founder loans. After all, they are investing in the company and want 100% of their capital to be put into growing the business.

With this in mind, it may be in your best interest to consider your investment as a non-reimbursable expense. That’s what investors would prefer.

That said, you did invest the money in the startup, so don’t you have a right to preferred shares? Well, most investors want you to own common shares, not preferred shares. This is because they want to get their money out before you start making a profit.

With this in mind, you may want to split the difference. One option is to basically issue a convertible note for $100k with no cap and no discount. This would be a relatively investor-friendly approach, but still give you preferred shares. Would investors object to this? It all depends on the investors.

Again, it’s a business decision you have to make. There’s no right answer.

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