Engel`s experienced investors are skeptical about whether issuers want to offer generous enough discounts. Given the much greater risk seed-stage investors take compared to later investors, a 10% or 15% discount for investors of discerning angels may not seem much like a reward. Try 50%, which would represent a 2x jump in cf-round valuation to the liquidity event, reasonable enough if the time between events is unlimited. Essentially, safe notes to really understand the concept, it`s not a form of debt, as you would see on convertible bonds, but a promise to turn the money that the investor gives you into something valuable, perhaps equity on the line. The startup does not have major intellectual property problems with its technology. Thus, the founders.B did not steal technology from a former employer. As for the benefits of note security, one of the critical points is that you don`t need a lawyer to do so. We are talking about five pages. You can literally get the secure note template, and do it yourself.
I think the ease of getting a structure like this is one of the main attractions of safe notes. 5 (c) As the holder of this instrument, the investor is not entitled to vote or receive dividends for any purpose, nor to be considered a holder of capital shares; Moreover, nothing in it is construed to mean that the investor as such is one of the rights of a shareholder of the company, or a right to vote for the election of directors or for a matter submitted to shareholders at a meeting of their shareholders, or to obtain notification of meetings or to obtain preferential rights or other means, until shares have been issued on the terms of this document. 5 (d) Neither this act nor the rights it contains can be ceded by law or in any other way without the prior written consent of the other party; However, provided that this instrument and/or the rights it contains may be transferred, without the company`s consent, to another entity controlled or controlled by the investor, directly or indirectly, including, without restriction, a general partner, an executive member, an officer or a director of the investor or a coercitor who is now or later controlled by one or more general partners or controlled by the same company or company; and provided that the company can sell this instrument without the investor`s consent as part of a reinstatement to change the place of residence of the company as a whole. Well, the two most important things about note security when it comes to the structure and terms there is either a ceiling, which means you already have an assessment where they don`t go when this conversion occurs. Or maybe the discount you`ll give on the valuation.