Does anyone have experience negotiating SAFE notes (convertible debt)?
October 24, 2022
by a searcher from Case Western Reserve University in United States
My team and I have about $600,000 left (of $2 million total startup) to raise using convertible notes.
Looking for any tips or best practices associated with using SAFE notes.
What do investors think of SAFE notes?
What would an investor rather see: lower valuation cap, higher discount, or something else?
What factors are most important in structuring convertible debt deals?
Any tips for managing multiple investors with static-round funding instruments like convertible debt?
from University of Pennsylvania in Washington, DC, USA
- SAFEs are more well accepted on the West Coast, while convertible notes are more favored by investors in the rest of the country.
- From the issuer's perspective, SAFEs are better than convertible notes
- I find there is rarely a lot of negotiation around discounts - they range between 20-30%
- Lots of room to negotiate caps - those can vary dramatically
- In a convertible note, other than discount and cap, its important to focus on the maturity date, the definition of qualified financing, the definition of fully diluted capitalization and the mechanics for conversion/payment in a change of control transaction.
- Lots of investors will want to set a specific dollar limit on the principal amount of notes/SAFEs that can be issued in a financing.
from The Johns Hopkins University in Basking Ridge, NJ 07920, USA