What does it allow us to do ?

• It can let me invest into Codex without having to valuate and decide on the equity for now
• It lets us wait until the [[priced round]] when another investor would want to invest with a certain valuation in mind.
• At that point , the convertible notes get triggered and hence the first investor gets the [[Shares]] before the new investor .

How does it compensate for the higher risk that the early investor took ?

• It gives interest on the provided investment and also a discount on valutation .
• These both are to be agreed upon before closing the deal on the convertible notes
• General , interest rate is 5-6% , while the discount could be from 10-25%
  • More on this at https://youtu.be/njx09wXb9o0?t=623
  • Ex : if i invested 10k $ , if the priced round happens after one year , my investment would be evaluated as 10.5 -10.6 k , rather than the original 10k and also if the [[valuation of the company]] is at 1 M $ , for me it would be valuated only at 75k $ .

Limitation :

• This wouldn't compensate enough for the risk , the early investor took , if there is a very high valuation and if the initial investment was small (comparitively)
• Solution -> Putting a cap on maximum valuation !
• 

  ⥅ [[Screenshot 2020-11-20 at 12.50.18 PM.png]]

What happens if company doesn't grow ?

• https://youtu.be/njx09wXb9o0?t=784

to research :

1. CAFE ^e2be26
   • https://fairmint.co/cafe-continuous-agreement-for-future-equity/
2. SAFE ^66a514