Startup Note Interest Rates Track Macro Rates Closely

For the macro economics nerds in the startup community - turns out our interest rates are just as sensitive as you expected to macro trends.

Took a glance through the data on convertible notes signed between Q1 2022 and Q1 2024 on Carta across all stage, 30,529 notes in all.

As a general rule since 2019, the median interest rate on a convertible note in early-stage startups was 6%. Pre-seed, Series A, Series B, didn't matter - 6% was the standard.

But if you look at the average interest rate since 2022, it has been on a tear. Pre-seed company interest rates on convertible notes are now 7.6% on average. 8.1% for note signed between seed and A rounds, 7.8% between A and B.

These rising averages have finally hit the median as well - across all early-stage 8% is now market.

Now, a few thoughts:

• Interest rates for pre-seed notes very rarely come into play for real.

• Startup interest rates are no special snowflakes - the Fed makes a huge difference here as everywhere.

• The cost of money in late-stage venture has risen precipitously and is even more important given the rising usage of these convertible notes in lieu of priced round bridges or extensions.

Please send all negative feedback and commentary to Jerome Powell directly 😁

#cartadata #interestrates #startups #convertiblenotes #venturecapital ____________________

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