I spent some time yesterday talking to an entrepreneur about this topic and I thought I'd share what I told him with everyone.

Startups typically think about raising capital via convertible debt early on in the life of a startup. They want to move fast, keep transaction costs low, and it is often easier to get the round done with a convertible note than a seed or series A round.

So if you are an entrepreneur, it makes sense to understand preferred stock and what it means for you and your company.

Being a founder of a highly successful company is thrilling but also a somewhat harrowing role. As the company scales, things change. Nothing happens as fast as it did when you first built the product.

There is a large, growing, and vibrant market for something called Venture Debt. It is indeed debt, largely provided by a number of banks and finance companies who specialize in this market.