CONVERTIBLE DEBENTURE FUNDING

Convertible Debenture Funding is a debt funding transaction done primarily by public companies to raise financing for working capital, to fund growth, acquisitions or mergers. It is structured as a private placement, meaning that the company is not permitted to advertise or make a public offering of its convertible debentures. This allows the company to save money since a public offering would be more costly.

Private Placement Funding for public microcap companies is done mostly with a certain types of hedge funds. One type of Hedge Fund that provides capital through Convertible Debenture Funding is known as a PIPE Fund. The PIPE stands for Private Investment in Public Equity.

Hedge funds, such as a pipe fund, are typically not long term investors like their counterparts the private equity funds. PIPE Funds usually only invest for about a year, or less, and that is why they invest mainly in public companies.

There are also some Special Situations Funds that will do convertible debenture funding as well as equity line funding and even funding through a more favorableStandby Equity Purchase Agreement. What is meant by a ‘‘special situations’’ strategy is investing that is designed to capture capital appreciation generated by a significant proposed corporate event such as a public listing, reverse merger, an acquisition, product launch, corporate restructuring or reorganization.

The Convertible Debenture structure usually provides the investor with certain rights and privileges that give the investor an advantage over other common stockholders. The conversion into common stock can be at either a fixed rate, or a floating discount based on the closing bid price of the company’s common stock. It can even have some sort of reset provision that would allow the investor to receive additional shares of common stock if certain events occur or do not occur. For instance, if there is a significant drop in the stock price, or an anticipated acquisition does not occur, or if the company does not meet certain revenue milestones.

Tips on Raising Capital.
One of the most difficult tasks small companies face is raising capital. Get some useful tips that might give you an extra edge on sourcing capital and structuring a transaction with interested investors

Reverse Merger Funding.
A Reverse Merger, if done properly can provide a fast alternative to going public through a direct listing. It can help a company raise needed funding by providing access to the capital markets. These types of funding transactions have become very popular over the years with hedge funds.

Overview of Venture Capital and Private Equity Firms.
Learn why they, along with hedge funds, are the leading source for raising capital. This information will add to your knowledge about Private Equity Financing Structures.

Tips On Venture Capital Deal Terms - Part One.
A discussion about when you should ask potential investors about "deal terms” and the advantage of using a separate Executive Summary to save time screening potential investors and to protect confidential information.

Tips On Venture Capital Deal Terms - Part Two.
This is a discussion of Venture Capital Deal Terms from two different perspectives, Business Venture Capital and Angel Funding. Learn some of the differences about dealing with each type of investor from a strategical point of view.

Tips On Venture Capital Deal Terms - Part Three.
Examination of Venture Capital Deal Terms as they affect Management’s equity position and cash compensation, which is directly influenced by the private equity financing structures used to fund the company. This Part Three then concludes with a discussion about what investors look for in Exit Strategies.

Convertible Debenture Funding.
Here is some more information and analysis on the convertible debenture structure and tips that may help you with structuring and negotiating with investors.