Wireless charging startup uBeam of Santa Monica is raising a $15 million convertible debt round, according to a Securities and Exchange Commission filing. The company declined to comment, but the filing said nearly $9 million had been raised from 23 investors since the offering was initiated July 10.
UBeam’s technology promises to wirelessly charge electronics at a distance of up to 15 feet. It does so by converting electricity into ultrasonic waves, transmitting the energy through the air and converting the energy back into electricity within the device.
Debt rounds are less common in tech startup funding, but can be valuable for startups of a certain stage, argues Rami Rostami, managing partner of venture capital firm TYLT Lab of Santa Monica.
“A lot of times, depending on what the tech is, if it’s not 100 percent validated, or if it’s not certain it will come to fruition, startups will raise convertible notes,” he said. “If you’re not sure, (it’s) a safe bet, from an investor’s point of view, it makes sense to come in for a convertible note.”
On the flipside, startups sometimes use convertible debt as a way to raise money without selling equity on unfavorable terms.
“The main reason (startups sell convertible notes) is because they don’t want to give up equity,” said Rostami. “They think the value of their equity will increase massively in the future.”
And that’s where uBeam sits currently: somewhere between massive market opportunity and uncertainty. The company’s wireless technology is promising, but it’s not ready for the mass market. It’s also in a race to become the standard in wireless charging, scrambling to establish its technology in the market ahead of San Francisco’s Energous Corp., another wireless charging technology startup that uses radio waves to transmit energy.
Ultimately, Rostami said wireless charging technology was “one of the fastest segments of the market right now” and said if uBeam’s tech “is safe, fast and cheap enough they could really take over the market.”
UBeam’s financing history has seesawed between debt and equity, possibility and cautious optimism. As recent as last October, investors including Upfront Ventures, Andreessen Horowitz, Mark Cuban, Shawn Fanning and Marissa Mayer bullishly poured a $10 million Series A round into the company.