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TheFunded.com and the Founder Institute founder Adeo Ressi tells us that the Convertible Equity vehicle provides a fast, cheap and flexible way for angel investors to invest money in a startup, that converts to equity at the time of a future round. The point, he says, is to avoid time-consuming valuation negotiations and allowing a variable amount of capital to be raised.

Basically, Convertible Equity removes the repayment at maturity and interest provisions of Convertible Debt. Additionally, Convertible Equity is “equity” that may have a lower capital gains tax benefit for investors, since it is likely classified as “qualified small business stock”.