Is it a fair convertible note arrangement if we don't need another round or exit beforehand?

It entirely depends on the kind of business you have. If you have a tech startup for example, there are pretty reliable assumptions about each round of funding. And a business plan and financial forecasts are almost totally irrelevant to sophisticated tech investors in the early stages of a company's life. Recent financial history is important if the company is already generating revenue and in that case, a twelve-month projection is also meaningful, but pre-revenue, financial forecasts in tech startups mean nothing. You shouldn't give up more than 10-15% for your first $100,000 and from that point forward, you should budget between 10-20% dilution per each round of subsequent dilution. In a tech startup, you should be more nervous about dilution than control. The reality of it is that until at least a meaningful amount of traction is reached, no one is likely to care about taking control of the venture. If the founding team screws-up, it's likely that there will be very little energy from anyone else in trying to take-over and fix those problems. Kevin is correct in that the board is elected by shareholders but, a board exerts a lot of influence on a company as time goes-on. So board seats shouldn't be given lightly. A single bad or ineffective board member can wreak havoc on a company, especially in the early stages of a company's life. In companies outside of tech, you're likely going to be dealing with valuations that are far lower, thus likely to be impacted with greater dilution and also potentially far more restrictive and onerous investment terms. If your company is a tech company, I'm happy to talk to you about the financing process. I am a startup entrepreneur who has recently raised angel and VC capital and was also formerly a VC as part of a $500,000,000 investment fund investing in every stage of tech and education companies.

Avoid buzzwords: - every founder thinks their idea is disruptive/revolutionary - every founder says their financial projections are conservative Instead: - explain your validation & customer traction - explain the assumptions underlying your projections Avoid: - focusing extensively on the product/technology rather than on the business - misunderstanding the purpose of financial projections; they exist in a pitch deck to: a) validate the founders understanding of running a business b) provide a sense of magnitude of the opportunity versus the amount of capital requested c) confirm the go-to-market strategy (nothing undermines a pitch faster than financial projections disconnected from the declared go-to-market approach) d) generally discredit you as someone who understands how to build a company; for instance we'll capture 10% of our market, 1% of China, etc. Top down financial projections get big laughs from investors after you leave the room. bonus) don't show 90% profit margins. Ever. Even if you'll actually have them. Ever. Instead: - avoid false precision by rounding all projections to nearest thousands ($000) - include # units / # subscribers / # customers above revenue line; this goes hand-in-hand with building a bottom up revenue model and implicitly reveals assumptions. Investors will determine if you are realistic, conservative, or out of your mind based largely on the customer acquisition numbers and your explanation of how they will be achieved. - highlight your assumptions & milestones on first customers, cash flow break even, and other customer acquisition and expense metrics that are relevant Avoid: - thinking about investor money as your money - approaching the pitch from your mindset (I need money); investors have to be skeptics, so understand their perspective. - bad investors; it's tempting to think that any money is good money. You can't get an investor to leave once they are in without Herculean efforts and costs (and if you're asking for money, you can't afford it). If you're not on the same page with an investor on how to run/grow the business, you'll regret every waking hour. Instead: - it's their money; tell them how you are going to utilize their money to make them more money - you're a founder, a true believer. Your mantra should be "de-risk, de-risk, de-risk". Perception of risk is the #1 reason an investor says no. Many are legitimate, but often enough it's simply a perception that could have been addressed. - beyond the pitch, make the conversation 2-way. Ask questions of the investor (you might learn awesome things or uncover problems) and talk to at least two other founders they invested in more than 6 months ago.

Wow, sounds like you have an amazing profit margin. The key is GROWTH. Continuous and stable, with the ability to predict future growth. Therefore, your market niche is very important, to feed the growth curve within an order of magnitude and can't be too vague. As others have mentioned, investors look for a $100-200 million valuation potential, as well as the ability to morph or expand as needed. Contact me if you want to discuss more.

100M+ in revenues in 5 years or less does not happen very often. As an example of one sector, here is an interesting data visualization (circa 2008) of the 100 largest publically traded software companies at that time that shows their actual revenue ramp-ups from SEC filings (only 4 out of these 100 successful companies managed this feat, which themselves are an extremely small percentage of all of the VC-funded software companies): How Long Does it Take to Build a Technology Empire? http://ipo-dashboards.com/wordpress/2009/08/how-long-does-it-take-to-build-a-technology-empire/ Key findings excerpted from the link above: "Only 28% of the nation’s most successful public software empires were rocketships. I’ve defined a rocket ship as a company that reached $50 million in annual sales in 6 years or less (this is the type of growth that typically appears in VC-funded business plans). A hot shot reaches $50m in 7 to 12 years. A slow burner takes 13 years or more. Interestingly, 50% of these companies took 9 or more years to reach $50m in revenue."

I'm assuming you're talking about yourself, working for another company? The first thing to consider is that a "1099" is NOT an employee, rather an "independent contractor". The IRS takes it seriously when a company claims 1099 contractors, when in fact, these contractors are treated as employees (the IRS wants payroll tax and will fine companies that miscategorize). To be a 1099 contractor, rather than an employee (W-2), you must have complete control over your schedule - when you work, how much ect. There are other criteria, but this is the main one - you must clearly not be treated the same as an employee. The other thing to consider is that if you are a 1099 contractor, you are responsible for paying and submitting your own income tax and self employment tax to the state and the IRS. It is more advantageous for a company to pay you as a 1099 contractor as they save paying employer portion of payroll taxes. Also you will not count as an employee for the Affordable Care Act (which impacts companies with over 50 employees). Hope this helps. Kathryn