I have a business plan that involves rolling out across several very large markets with only minor adaptations to the product (a SaaS). But even rolling out in a meaningful way in the first market will require capital that I don't have. Provided I can find an investor (it's own challenge), how do I structure a deal that gets some small capital but leaves me open to a better round of investment later (from this investor or another group) once I've proven that I can succeed in the first market?
A convertible note is a possible route. It would provide the owner with a discount to the price set at your next round of funding. For example, assume you give the note holder a 50% discount on your next round. Then your Seed Round sets the price at $10 per share/unit, the note owner would be able to convert their $50,000 for 10,000 shares ($5 per share). You'd have to negotiate more specifics such as interest payments, term length and any assets used as collateral in the event that you end up in bankruptcy.
Feel free to reach out with any questions or to set a time to talk.