Convertible Bond

The advantage of issuing convertible bonds in a start-up is that the company receives cash and doesn't need to fix the conversion price at issuance.

Usual features:
1) Coupons (might increase over time)
2) % Discount, e.g. note-holder can exchange note at 75% of the next round, into equity
3) Conversion into common or preferred stock
4) Warrant coverage in % of note amount.
5) Conversion of Warrants can also be discounted so that one effectively receives more warrants