Re:Bad Notes on Venture Capital
by austenallred on Thursday September 18, 2014 @11:49AM
(#8335858)
Yes. All of that applies to SAFEs as well, which are basically convertible notes that aren't "debt."
Basically convertible notes were kind of a financial hack that let you take money without setting a price by calling it "debt," even though no one really regarded it as debt. That brought along a couple small negative side effects, but the good outweighed the bad and let you close rounds quickly without $10-25k in legal fees and seemingly endless negotiation.
A SAFE is the same thing, but it jumps through the hoops necessary to not be called "debt" and gets rid of those side effects.
Basically convertible notes were kind of a financial hack that let you take money without setting a price by calling it "debt," even though no one really regarded it as debt. That brought along a couple small negative side effects, but the good outweighed the bad and let you close rounds quickly without $10-25k in legal fees and seemingly endless negotiation.
A SAFE is the same thing, but it jumps through the hoops necessary to not be called "debt" and gets rid of those side effects.