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Convertible notes are a great tool for venture financing. They are primarily used for early-stage financings, but they are also a good solution for a bridge round when a company isn’t quite ready for the next equity financing round. The actual mechanics of converting convertible notes (in other words – calculating conversion shares) is not a simple task and requires great care.

Throughout the years of developing Gust.com and Gust Launch, we recognized a common pain point in the startup journey. Founders, the passionate entrepreneurs pouring all of their efforts into building their ventures, had questions about how to properly set up their startups. They ask those early questions: What should we be doing? How do we set it up? How do we take this idea and turn it into a unicorn? Which then leads to more specific startup questions: How do we issue shares? How do we fundraise? How do we build out our team?

By this point, the word “lean” has been so used so frequently and in so many contexts that you could be forgiven for thinking that it was completely meaningless. But it’s actually quite the opposite. The reason the term—and the thinking that it represents—has swept the startup world is because it makes fundamental sense. Originally developed by Steve Blank and brought to popular attention by Eric Ries in his bestselling book and subsequent series, the core philosophy boils down to a loop that cycles through three steps: Build. Measure. Learn.

You can’t succeed in business without an operational model that delivers value to customers at a reasonable price, with an underlying cost that allows you to make a profit. There are no “overrides” – for example, businesses don’t thrive just because they offer the latest technology, or because everyone wants to be “green,” or because their goal is to reduce world hunger. I expect that should seem intuitive to all entrepreneurs, but every investor I know has many stories about startup funding requests with major business model elements missing. The most common failures are solutions looking for a problem, lack of a defined market, or an inadequate revenue model.

A business model is the idea that underlies a successful business. It describes how the business creates value for customers, delivers that value to them, and captures a portion of the value for its owners. Every successful business, no matter how large or small, complex or simple, operates according to a business model that makes sense. (Of course, some large, complex companies operate according to several business models at once, since they include divisions or departments that create, deliver, and capture value in varying ways. But don’t let that confuse you.) Therefore, one of the most important steps you need to take as an entrepreneur is to transform your business idea into a business model that shows how you’ll create, deliver, and capture value.