More On Convertible Debt
My previous post on why convertible debt sucks shouldn’t be construed as advising to never use it, but rather to explore your alternatives and avoid it if you can. For example, Andrew commented that this might be his only option. Others have pointed out another scenario in the case where there is a major milestone in the near future and you’re confident a little cash can get you there. Okay. Just remember, it’s "easy" to get into, but harder to get out of than straight equity and it creates some screwy incentives.
Also, here are some additional resources with more detail on the mechanics of convertible debt and opinion and analysis from other entrepreneurs, angel investors and VCs: