Issuer and investor awareness is key to minimizing the negative impact.

Issuer and investor awareness is key to minimizing the negative impact.

In more traditional convertible debt, it is possible to provide for voluntary note conversion under specific circumstances. Maturity/conversion ahead of a new equity round can greatly dilute all existing shareholders, but also can get a new lead investor “over the hump.” Multiple series of notes can create “dilution waterfalls” and hamper future priced rounds, as large portions of the pie have already been carved out to founders, converted note holders and Series A investors. In these cases, the only valuations that makes sense for a Series B lead investor force the dreaded “down round.&rdquoIP Networking Solutions;

While “rocket ship” companies can overcome the structural issues of rolling notes, there are many more SAFE issuers than there are rocket shipshong kong day tour.

Many CEOs do not understand the true cost of the future equity they are selling in a SAFE or convertible note instrument, especially in the all-too-frequent “waterfall” scenario. Companies should always gauge whether notes are setting up the company for success in a future round, or whether additional notes are suitable at the company’s current stage of development. Issuer and investor awareness is key to minimizing the negative impact moving forward, and can help improve capital efficiency in venture capital for early-stage companiesWhere to shop in Hong Kong.