What you need to know

The financing is done in the form of convertible loan (or debentures). A convertible loan is a loan that is convertible into shares of a company. It offers a loan that, instead of being paid back with interest, can be turned into equity of a company at a financing event (e.g., next round after graduation). The capital plus the accrued interest of the note is then converted into equity, based on the conversion agreement between the company and the investors.

For participants in the Ecofuel program, the potential investment can be up to $75,000 (according to the capital needs identified by the Selection Committee). The advantage of this financing vehicle is in its simplicity (it also saves precious negotiation time), and allows many startup companies to avoid negotiating a new shareholders’ agreement before the closing of such a financing round. Basically, this investment vehicle accelerates the investment process.

A convertible debenture consists of a loan convertible into shares of the company.