In this conversation, Daniel Faloppa and Dan discuss the evolution and complexities of SAFEs (Simple Agreements for Future Equity) and convertible notes in the early-stage funding ecosystem. They explore the historical context of these instruments, their current usage trends, and the challenges faced by founders and investors. The discussion highlights the importance of understanding the terms and conditions associated with SAFEs, the implications of using multiple SAFEs, and the need for a more standardized approach to these financial instruments. They propose a reevaluation of how caps and discounts are set, advocating for a first-principles approach to better align the interests of founders and investors.
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Takeaways
SAFEs were created to simplify early-stage fundraising.
The average time to convert a SAFE is now over two years.
Investors often prefer price rounds over SAFEs due to clarity.
SAFEs have evolved and are now used more frequently than convertible notes.
The complexity of SAFEs can lead to confusion for founders and investors.
Data shows a significant increase in the use of SAFEs in seed rounds.
Standardization of SAFEs contributes to their popularity.
Multiple SAFEs can complicate cap tables and funding rounds.
A first-principles approach is needed to set caps and discounts.
The required return for early-stage investments is often underestimated.
Chapters
00:00 Introduction
02:39 The Rise of Safes in Early-Stage Financing
08:34 The Problems and Complexities of Safes
18:04 The Lack of Consensus on Safe Terms
23:07 The Stacking of Multiple Safes
28:07 Rethinking Safes: Towards Standardization and Transparency
36:47 The Bias and Challenges of Convertible Notes
41:38 Setting Realistic Expectations for Caps and Discounts
51:45 Determining the Cap Based on the High Bound of Valuation
Transcript
Daniel Faloppa (00:00)
All right. So today, a little turn of events. have me starting the podcast. We’re going to talk about SAFEs, Convertible notes, like the whole sort of early stage ecosystem financing instrument problems. And like, I think we got pretty close in the past months with all your studies and with our discussions to understand what is
the current market and what is state of the art in terms of like the understanding of the industry of these instruments. And today, I think we’re gonna try to bring our perspective and to just open up the discussion to the whole environment to see whether what we found is useful, interesting, applicable, practical, if it’s gonna be actually…
the new way of thinking about these things. So yeah, quite an exciting episode, I would say.
Dan (00:54)
Yeah, and there’s a lot of interesting stats that we have mostly sourced from Peter Walker of Carta. He’s done a lot of research on how SAFEs are used, how the use of them has changed over time. And that provides a lot of interesting context for all of this, including pointing out some very weird stuff, I think, that we’ve tried to address. And we’ll get into that a little bit more later on.
Daniel Faloppa (01:18)
Yeah, so maybe do you wanna start with all the research that you’ve done? Do you wanna start with what’s the state now and sort of how we came to that point?
Dan (01:28)
Yeah, so for background, The SAFE was created in 2013 by Carolynn Levy of Y Combinator. And the goal then was very practical. Paul Graham came to her and said, you know, we need to do something to simplify early stage fundraising. At the time, convertible notes were in use and like relatively, relatively common, but
there was a lot of time wasted negotiating what I would call abstractions, like what’s the interest gonna be, what’s the maturity date gonna be? And it’s already complicated enough to understand things like valuation, but when you get into what should my interest be on a convertible note, it’s kind of mind -bending. So the SAFE was created to get rid of all of that and make it as simple as possible.
And obviously they’ve done incredibly well. The SAFE has grown impressively. We’ve got some data on this as well that I’ll share in a little while, but it’s most of early stage fundraising now, most of seed rounds, definitely almost all of pre -seed. And it’s evolved a bit over time as well. originally it was SAFEs were all pre -money.
So they were calculated without the capital from the SAFE itself or from other convertibles in that round. Now they’re all post money and there’s pros and cons to that we can get into as well. And there’s various different versions of the SAFE too. But I think that the important thing to start with is the way that SAFEs are used today, and particularly,
how frequently, how often founders are raising with SAFEs, how many SAFEs they’re raising as well, is not how the SAFE was designed. I think perhaps most importantly, how long they take to go from SAFE to conversion. I don’t think that’s how the SAFE was designed. So the use today has maybe fallen out of line with the intention a little bit, I think.
Daniel Faloppa (03:24)
Because the idea originally was to simplify that very, very early stage when you already knew there would be a professional VC right around the corner, like maybe 12 months type of thing. And you would do probably one SAFE, like pre -seed rounds were way smaller, right? 200 to half a million maybe.
Whereas now you can go on on saves quite a long. Actually, I think, we have averages on that, right? We have data on what’s the average like SAFE total for companies. It’s like for SaaS, like 2 .5 million with 84 % raised in that on saves and 16 on convertible nodes.
Dan (04:02)
Yeah.
Daniel Faloppa (04:11)
So yeah, what happened?
Dan (04:13)
Yeah, yeah, indeed. And the timeline from C to series A, there’s quite a few articles about this. I wrote one for Crunchbase a couple of months ago. Has increased. It’s now over two years as an average. So that’s two years that investors are waiting for those SAFEs to convert. When if you think about the origin of the SAFE and who it was designed for, it was founders graduating Y Combinator.
and raising a bit of money to get out into the market and start to grow and then quite soon after that do a price round with VCs. So yeah, it’s changed quite a bit.
Daniel Faloppa (04:47)
Yeah.
Yeah, and I think we hear a lot like, well, one of the few things that we’ve kept on repeating over the years around SAFEs and convertibles is don’t use them just because they are simpler than the equity negotiation, right? Because that’s not the case actually when you go and look into the instruments, especially when you start like stacking them and doing different things.
Dan (05:02)
Mm
Daniel Faloppa (05:15)
different caps, different conditions for different investors and so on. It gets complicated pretty quickly. Do we want to sort of understand what’s the difference with convertible nodes maybe and then understand what are the main terms just so we set up our framework for them?
Dan (05:33)
Yeah, I think that’s a good idea. So there, I mean, essentially there’s two main forms of like convertible instrument. I mean, there’s also a ton of others like the UK has the advanced subscription agreement and probably there’s others elsewhere as well, but they’re more or less versions of the SAFE. So you have convertible notes, which are essentially loans that will come with interest. We’ll have a…
maturity date potentially, might have clauses around what constitutes a qualified financing event for the conversion. So they’re a more complicated instrument that is generally sees more use. I think notoriously European investors use convertible notes more because they’re perhaps a bit more risk averse. It’s also used more in
kind of hard tech or more kind of capital intensive industries. We’ve got some data on that as well from Peter. And they still have a role for sure. And in fact, actually, interestingly, the use of convertible notes is growing as well, just much more slowly. It’s really price rounds that are shrinking at early stage. So obviously then the alternative, the main alternative is SAFEs, simple agreements for future equity and
they basically are what they say on the tin. An investment today that will convert at a certain point in future into equity. And both of those convertible notes and SAFEs have either a cap, which is like a ceiling on the price they’ll convert, or a discount, which is a discount on the price round valuation, or both, potentially.
Or neither, sometimes.
Daniel Faloppa (07:12)
Yeah, uncapped and without this. So for me, also the SAFE is almost like a subcategory of convertibles. It’s like a simplified, more founder -friendly convertible that indeed, the convertible maybe had origins in more like hardware, larger projects, type of loans that, projects that were less risky than startups that could actually support a loan, but that…
in case things got, went bad, it could convert into equity and have more rights over the decisions of the company from that point forward. But it doesn’t apply to like the little startup, the software startup that has no assets whatsoever and just needs like something more simple.
Dan (07:58)
That’s interesting. Do you think convertible notes were originally intended to generally be paid back or to generally convert?
Daniel Faloppa (08:06)
Like in my experience, right? So when we started like, well, more than 10 years ago in Europe, so, you know, that’s like 15 years before the US kind of, the, like all these type of agreements are a lot more traditional, right? So I think a lot of the funding for anything in more traditional times was loans and debts and things, right? If you wanted to like,
Dan (08:17)
You
Daniel Faloppa (08:34)
before venture capital, actually, there was almost no equity funding, right? Like, okay, like a big magnet that would back you, but that wasn’t even institutionalized or anything. There would be no standard thing at all. So the standard thing was the loan. So I think the convertible was a way to bridge the gap between like this more traditional funding, which was abundant, but didn’t understand the risky investment. And then the equity funding, which was…
like done by very, very few players and still not standardized, right? So yeah, that’s probably how they originated. I mean, I don’t have like data to back this up, but it sounds like an easy way to bridge the gap with people that are used to giving loans, right? Yeah.
Dan (09:18)
Interesting. Speaking of that, should we have a look at some of the data that Peter has shared?
Daniel Faloppa (09:22)
Yeah, yeah. I just wanted to like maybe like under like if we go a little bit more basic, explain what are the two terms, right? So just simply when we go raise a convertible loan or a SAFE, at some point they’re going to convert into equity, right? And that’s we call the conversion valuation, which is different from the conversion round, right? So you might do a round that triggers a conversion.
Dan (09:30)
Mm -hmm, sure.
Daniel Faloppa (09:50)
it triggers a conversion at the conversion valuation, right? So the valuation of the round and the conversion valuation normally are different because of two terms. One is the cap. So the cap is limiting the conversion valuation to a certain maximum. And then the discount is applying a discount over the round valuation to get to the conversion valuation. So let’s say…
conversion valuation should be 20, 30, whatever we’re going to talk about the specifics, percent less than the valuation of the next round in order to compensate earlier investors as people that invested in the SAFEs or convertibles have invested earlier compared to the next funding round of the company where the company is going to be less risky. Again, the theme of today’s podcast will be SAFEs are simple in name only. There is no…
Dan (10:42)
You
Daniel Faloppa (10:42)
There is
very little, very little simple things. It’s a lot simpler. It’s a lot simpler to just take 10 % of the equity for half a million and be done with it, right? But yeah, so.
Dan (10:57)
That’s true. There’s
actually a very interesting interview with Kate Beardsley of Hanna Grey VC. And she’s an unusual investor because she talks about why they preferred price rounds even very early at seed, for example. And there’s a lot of interesting perspective about the value of actually having like a concrete valuation, a stake planted in the ground. This is what the equity is worth rather than.
the kind of vagueness of a SAFE.
Daniel Faloppa (11:26)
Yeah, because then you still plant a stick with the cap, but it’s not really a stick, right? Sometimes there is no cap. yeah, interesting.
Dan (11:30)
Mm.
Yep. And it is
a cap of evaluation or like what is a cap compared to evaluation? That’s maybe something we can get into a bit later on as well.
Daniel Faloppa (11:42)
Yeah, yeah.
Dan (11:43)
But I think also like on the side of like basics before we get in too deep from a very basic perspective, you know, I would say I’m interested what your perspective on this is as well. Essentially, the role of a convertible is for a founder that says we need to raise money today, but there is something that’s going to happen.
to the company or a milestone we’re aiming to hit, let’s say somewhere between six to 18 months, that is gonna fundamentally change the perceived risk or the risk profile of the startup. So that’s why it doesn’t make sense, maybe in that situation, to do a priced round because you’re get a much lower valuation than you might do in just six months later. So you do the convertible, you try and hit that milestone, and then when you do, then you say, okay, now if we can convert,
we get more favourable terms.
Daniel Faloppa (12:37)
Yeah, so that is true only, or at least it should be true only, if investors get something in return for the convertible. And what they get is the better safety of it being a loan.
Dan (12:49)
Mm
Daniel Faloppa (12:56)
Right? So the fact that it’s a loan and investors are protected a lot, because investors are going to have the same expectation maybe about what’s happening with the company, like that rosy next step of the company. Right? So if investors and founders have the same expectations, you would end up with the same outcomes on both instruments. Right? If there is no extra factors. So the extra factor would be the protection because it’s a loan, but a SAFE has almost no protection for investors. So in the end, it’s either…
Like it’s either just an instrument that is easier to understand or easier to set up and it’s gaining steam. Or maybe there is a difference in expectation that this instrument allows to capture, right? Founders are very, very overconfident. They would rather delay the conversion because like they believe things are gonna go very well and investors are…
Like they don’t want to say no, they don’t want to like plant a stick in the ground of a very low valuation because they’re not confident. So they just say, okay, let’s see how it pans out. So that may be the sort of like this behavioral difference and this difference in information between what the founder knows and what investors know or believe might make a small case for convertible. For me, it’s still a small case, right? It’s used by, and we’ll see.
like 80 % of the market, right? But I do still think it’s a small case. It should be a small case because…
Dan (14:14)
Yeah.
Daniel Faloppa (14:21)
Because like we can talk about that information asymmetry. We can we can agree on evaluation. We can have the same expectations We don’t need to to delay it if we delay it like and then we talk about our suggested way of doing convertibles Which I think is much better than than what it is now because if we delay it But then we put a cap we put an arbitrary discount we put which is not even yearly We have several several problems in that at that point. I would say the
the straight up price round is far superior to today’s convertible notes, in my opinion, for like 90 % of the businesses that end up using them. that’s the hot take for today. But maybe that leads us into like, let’s see what are these usage statistics that we found.
Dan (14:56)
Mm
Yeah, so let me
pull this up. I’ve got a series of graphs, data, as I mentioned, from Pete Walker of Carta, like super interesting analysis of actual SAFE rounds recorded on Carta. like, you know, potentially there’s a little bit of bias towards, you know, Silicon Valley companies. Some people say maybe there’s a bias towards AI that might slightly increase these valuations, but…
Generally the pool of data is large enough, like this is pretty solid. As solid as it gets, I think. So this first one shows the growth over time of SAFEs at seed. So 2020, they were only 24 % of seed rounds. Whereas in the first half of last year, it was up to 50 % and presumably even higher today.
And you can also see convertible notes, as I mentioned, have increased slightly over that time too. Much less quickly, the real difference is the fall in the number of price rounds at seed. And kind of curiously, the trend doesn’t change much through 2021 and 2022. Despite all the volatility around that time, this is clearly a trend that was not a consequence of ZIRP, I would say.
Daniel Faloppa (16:28)
exactly.
No, exactly. It’s not an outcome of how the environment is evolving. has its own… It’s just getting more popular, right? I do believe it’s just getting more popular. And this data goes to H1 2023, but I think H2 and even 2024 are going to be a continuation of that trend. Plus, this is US startups, but the same thing is happening…
Dan (16:46)
Mm
Daniel Faloppa (17:03)
with different names, but with like convertible notes, broadly speaking, in Europe as well. Yeah.
Dan (17:14)
So this is interesting, like speaking before about the use of convertible notes specifically as opposed to SAFEs in more like capital intensive industries. I do find it interesting, know, medical devices, 45 % convertible notes, pharma, 43%, and then all the way down to, you know, let’s say like SaaS is the most kind of vanilla example here that’s overwhelmingly
SAFEs at that point. But it’s a good reflection, I think, of the purpose that convertible notes still have, the role that they play, and depending on the sector that you’re in as a founder, it’s definitely an option you should consider. Also depending on who you’re talking to about fundraising.
Daniel Faloppa (18:04)
Yeah, yeah, 100%. And if like, I don’t know how much of this is just Y Combinator notoriety, right? Because for medical devices, like you have much less fame in a sense of Y Combinator. YCOM. And then as you go down this list, almost. So yes, that’s an interesting question. It also looks like in the previous data, they were tracking 13 ,000 US startups, whereas here is
Dan (18:17)
Mm
Daniel Faloppa (18:34)
39 ,000, but it’s not startups, it’s SAFEs. So I don’t know if this is global rather than US, but it’s still going to be US bias because just cartas data.
Dan (18:38)
Mm
And to an extent, well, a very small extent. If SaaS startups are raising more SAFEs kind of per startup, maybe they tend to raise two or three compared to a pharma startup that may only ever do one. That’s another consideration, I suppose.
Daniel Faloppa (19:04)
Yeah.
Yeah, exactly. It’s a bit strange. It would be nice to see how many companies have SAFEs rather than how many SAFEs are done. But still, yeah. And I mean, the advantage also of SAFEs over convertible notes is that it’s extremely standardized, right? So…
Dan (19:13)
Mm
Daniel Faloppa (19:25)
You don’t have to really read a lot of the fine print if somebody is reading, is doing just a straight up save, write off the website of WICOM. It’s trusted by both, is known by both parties, is trusted by both parties. So that really helps in popularity.
Which is also why I do believe in these things we should work together as an environment because you make a tool understood and popular and more default and it just grows just because of that. It might not even be extremely superior, but it just grows because of that. And we need the standard structures to kind of be the bedrock of building companies on top of them.
Dan (19:58)
Mm
Yeah, and to an extent, this is something we can talk a bit more about later, that they kind of take on a life of their own and are used by the market in ways that perhaps weren’t intended originally, which is interesting. But yeah, to your point about the Y Combinator effect, this list is an interesting example of like a, it’s almost like a ranking of difficulty for venture capital. Like.
Daniel Faloppa (20:18)
Yeah.
Dan (20:31)
Medical devices are the hardest sector for VCs to understand and invest in and appreciate the risk of them and working your way down the list, you can see it kind of getting easier and easier, although I’m surprised gaming is the last example there.
Daniel Faloppa (20:46)
Yeah. Yeah, I wonder. I wonder. Like, it’s also gaming is where you have the most information asymmetry, in a sense, or the most expectation asymmetry, because games, pretty much the exact same game, can be a blockbuster.
unlimited money super sell type of thing, or it can be $1 a month app on the app store that nobody is ever going to download. So the same goes with movies. Like it’s so difficult, songs to some extent, but it’s so difficult to finance those beforehand. And there is a huge difference in expectations.
Dan (21:11)
Mm -hmm.
Yeah, that’s very true. And there’s a lot more I could say about like venture capital in the games industry and what it actually goes into and the kind of games it produces. But maybe that’s a different podcast.
Daniel Faloppa (21:48)
Yes it is. Yeah, it’s an interesting one as well. It’s a big topic.
Dan (21:55)
So this is looking at the number of different SAFE caps that startups have. So this goes to the point from the kind of introduction about the way that the use of SAFEs has evolved over time. You know, if originally they were intended to be just the first round to get you to the price round, you can see from this data that’s quite different today. You know, there are companies raising as many
Safes at as many as eight different caps, which is just insane to me. I don’t know how either the founders or the investors are comfortable with that situation. I suppose they’re probably not. It’s very strange.
Daniel Faloppa (22:38)
I mean, you can keep track and then it becomes a game of ifs, right? If the next round, if the next round, if the next round. Yeah, or it could be that they are like for fairly smaller rounds, but just the math gets extremely complicated. And yeah, it becomes a stacking of ifs. Yeah, and this is one of the problems, right? So this is…
Well, especially, I think when you look at post -money saves, right, this becomes a bit of an issue.
Dan (23:17)
Yeah, absolutely. There’s lots of problems. Well, in either case, it’s, you know, post money, in theory, it’s slightly easier to keep track of your dilution, but also founders can be diluted to nothing if they lose track of, you know, what they’ve raised. And pre -money SAFEs are potentially even trickier to keep track of, but yeah, the dilution is more kind of evenly split between the founders and the investors.
Daniel Faloppa (23:44)
Yeah, I think if we want to recommend something, or at least we don’t see any first principle reason to keep on stacking SAFEs aside from the business is still extremely uncertain, but every startup is extremely uncertain. To my previous point, if the first SAFE is already…
like not great, right? The second, third and fourth, like they just magnify the issues. It’s not like company breaking, I don’t think. Like you can, you know, model yourself out of these things and then, or like just, you know, use a cap table software and like do a waterfall analysis. And if your next valuation is above, you know, 40 million, you still, you know, you have a certain percentage of equity and so on.
but it just complicates the cap table and it complicates the funding rounds. And then, what we also say in our webinars and stuff, there are three ends to this. So the one end, you raise the big round, you convert everybody. Hopefully everybody’s happy, especially you as a founder because everybody else has caps and things like that.
Those are all in favor of investors. Or the company goes bankrupt, in which case, also everybody’s at zero, there are no problems. What happens a lot of the times is the company actually survives, especially in an environment right now, right today, right? Like after the big hype of 2022, let’s say. You have all these companies that actually need to be cash flow positive, they need to be ramen profitable. And then…
you’re almost aiming at creating a scenario in which the SAFE is not going to convert. A lot of the companies, I think, find themselves in this situation. The SAFE has no triggers to convert and you just drag them along for forever. If you do want to convert them, or if they have an expiry date or something like that, you find yourself in that negotiation where nobody has any leverage. When you were raising the round, you had some leverage to…
to set the valuation because the investor wanted to invest and things like that. But now the investor already has the legal right to some shares. So when you go into negotiate that valuation at that point, you have zero leverage as a founder to actually get a good valuation. So it all comes down to how nice everybody is. And that’s really not what you want to have, especially if you kind of were…
very free in issuing your saves and you gave them a bit to people that you didn’t super trust or super vet or something, then that discussion is going to be extremely difficult in a state of the company that is already difficult because it’s not going extremely well, it’s not going to zero. In that case, you have a problem.
Dan (27:00)
Yeah, and some of the usage data on SAFEs makes the point, at least to me, I think investing in startups, you should be an optimist. You should clearly have the best interests of the company at heart. But the way that SAFEs have been used, or I would say maybe misused, shows some cynicism on the heart.
part of investors, like some kind punitive terms used. But yeah, we’ll get into that.
Daniel Faloppa (27:38)
Yeah. Yeah, mean, let’s, right? So the… So problem one, right, is like of any SAFE, really. What happens if the company goes kind of steady, like normal growth, nothing exploding where you need to raise more capital or you can raise more capital, nothing awful where it all goes to zero. So that’s problem one of all SAFEs, right? Then we have the terms.
I think that’s a problem too. And we were really trying, we got these questions a lot, right? Like, how can I set my cap and how can I set my discount? We have some of the most popular SAFE calculators online and we try to share some data there, but there is no, at least to our knowledge, right? There is no first principle argument on how to set these things, right?
Was that where you were going with the problems on these parameters?
Dan (28:42)
Yeah, also
just the way in which discounts are used particularly. But yeah, certainly the conflicting opinions, the lack of consensus about something as seemingly simple as how a cap should be determined, the range of opinions about what a cap represents. And that like those kind of problems where there isn’t a kind of consensus to point to, that’s where you have
let’s say the less well -intentioned investors who maybe have a deliberately slightly more cynical or pessimistic perspective that they use. And ultimately, if they tell a founder, this is how it is, most of the time the founder is just going to believe them because the authority that they’re perceived as having.
Daniel Faloppa (29:35)
Yeah, mean, like it’s business, right? So everybody’s trying to find an advantage. And if the word just gives you an advantage, right, with the fact that SaaS companies were undervalued for 10 years, right, then people are just going to take it, right? I mean, there was this very interesting research on UK university spin -off, right? And how this, like the first spin -off, like,
Dan (29:49)
Mm
Daniel Faloppa (30:03)
the founders got like 5 % equity or something. And that became the benchmark for all the rest of the spin -offs to have incredibly low funder equity with the detriment, with the problem that founders had no incentives to actually bring these companies to market, basically killing the whole university innovation environment in the UK. Like that’s a huge thing, right? It’s like the money that is spent on universities from taxpayers is huge, right? And then if all the innovation that comes out of it is
Dan (30:10)
Mm
Daniel Faloppa (30:33)
is killed because of wrong benchmarks, right? Because the first person that never had the model for this just picked a number or negotiated a number. That’s like, it’s tragic, right?
Dan (30:48)
Yeah, and that’s absolutely a problem here as well, I think. So this data is kind of the genesis of our rethinking the SAFE, or our deciding to take a look at the terms of the SAFE and how they’re used or how they should be used perhaps. And you’ve got post -money or pre -money. And as we said before, there’s kind of pros and cons to both, but post -money is now the…
the standard of the two for better or worse. And then on the terms specifically, so valuation cap only 61 % as the clear majority. And I think that’s largely due to the fact that it’s seen as the simplest way to approach doing a SAFE, even though there’s lots of questions about the cap as we said. valuation cap.
and the discount, this is where I start to have a bit of a problem. Like that’s at 30%, which is quite high. And the issue I have with that is based on, know, I believe you should be an optimist if you’re investing in startups and you can say, I want to have a cap to limit the, know, so that there isn’t a runaway valuation and I don’t get like a tiny ownership percentage in the end. Like you can limit that side of things.
But to be an investor and to then also say, if you don’t hit the cap or if you raise exactly at the cap, I want another term there that’s going to give me a discount on top. like, that feels a bit like having your cake and eating it to me. Like if the startup hasn’t hit the cap because they’re not doing as well as they maybe could have done, should you really be using that as an excuse to dilute the founders further?
Daniel Faloppa (32:41)
Yeah, I mean, and that depends on how do you model the cap, right? Because if you model the cap at the next round, like at the target valuation for the series A, let’s say, and you’re doing a seed convertible or SAFE, then you want to have a discount there, right? Because that cap is set at the next round, but these guys are investing at this round, which is like a year or two years earlier, right?
So you want to have an advantage, right? These people are taking on more risks. They need to be compensated for it. And that’s, know, like one model that is fairly easy to understand is very difficult to set because if you don’t know the valuation today, how are you going to know the valuation of the company in two years when it’s going to do a series A? So again…
What’s the argument of using saves here? Valuation cap only, again, it’s simpler, but then it all depends on how do you set that cap, right? Because if you set it at the next valuation of a series A, and then again, we can talk about is that optimistic series A? Is that a conservative series A target? Is that a very conservative one? So in that case, like…
Dan (33:52)
Mm
Daniel Faloppa (34:10)
Let’s say that you set it at the consensus series A valuation between you and investors. That means that these investors are not being compensated for the current risk, right? Because they are investing sooner. So then I’m assuming everybody that does valuation cap only goes like, we’re probably going to raise like a series A at 40 million. We are going to set the cap at 30, right? Which is basically a discount, right?
Dan (34:39)
Hmm.
Daniel Faloppa (34:39)
So,
yeah, it’s funky because there is no, again, no first principle theory about this. And I think the other thing that I wanted to add is we don’t have much of a horse in this race, right? I mean, of course we like price round more, but I think we’re just nerding out. We like first principle. We like first principle understanding of these type of things. And if…
Dan (35:01)
Thanks
Daniel Faloppa (35:07)
there’s anything to gain for the startup scene, then even better. But it’s just curious, right, that this is the way that things have converged to as of now.
Dan (35:17)
Mm -hmm.
Yeah, it is. It is curious. And it’s difficult to get a clear picture of everybody’s perceptions. It’s such a subjective question. But I think it’s reasonable to say that when it comes to setting caps, the most common approach is for investors to say, this is the amount of ownership we would like.
at the price round. So they’re looking for a valuation which is, or they’re looking for a cap, which produces the kind of target ownership that they would like.
Daniel Faloppa (35:58)
Yeah. So then in that case, the difference with a price round is that if they do a price round, that’s it. That’s the equity that they get. But if they do this in a convertible and the company does worse than what is forecasted, then they get even higher than that target equity that they have. So.
Dan (36:17)
Mm
Daniel Faloppa (36:21)
which, know, fair enough, right? Like the founder is very confident that’s gonna happen. Investor is less confident. Okay, let’s both bet on it, right? With equity in a sense. But yeah, I don’t think founders see it that way, They see it as a way to give away less equity if everything goes really well, but I don’t know how many look at the…
Dan (36:31)
Mm
Daniel Faloppa (36:47)
And we talked about this before, there’s a huge bias on actual news and things like that of what actually happens. And I think, you know, when we looked at the data a couple of years, well, a year ago or so of the UK, like what’s the average time to see this? Hey, what’s the average time? Even this data is surprising, right? That people have an average time to convert convertibles of what was it? Two years, something like that, right? So, you know…
can a founder really be realistic in its expectations when setting up caps and things for convertibles, right? It’s a good question.
Dan (37:26)
Yeah, just on the UK example, that’s where this all becomes even more complicated because UK startups, they can raise with a kind of tax incentive the enterprise investment scheme or the seed enterprise investment scheme. But if you raise with those, which investors generally do want you to because it has that tax benefit, you have to include a long stop clause, which is a maximum of six months.
So if you raise on a convertible, you have to convert it within six months, which I think is potentially quite a beneficial thing. Maybe six months is a little too tight, I don’t know, but you know, it’s interesting.
Daniel Faloppa (38:01)
Nice.
Yeah. Yeah, so that’s the other usage of convertible that we haven’t touched upon until now because it’s such a small thing in 2024, is one of the original intended usages, which was to bridge a gap. Right? So let’s say you raised your seed or, I mean, we’re talking about…
Dan (38:26)
Mm
Daniel Faloppa (38:32)
10 years ago, so there’s no pre -seed, right? So you raised your friends and family around as it was called, right? You raised your friends and family around, you got 90 % to market, you cannot raise your seed or series A until the company is actually in the market or whatever the product has had some more traction, whatever.
Dan (38:34)
Yeah.
Daniel Faloppa (38:54)
At that point, you go back to the previous investors or you find new ones and you go, hey, can you help me bridge the gap for the next three, four months as I look for a Series A? I just need 100K or whatever. And in that case, I think the convertible makes a lot of sense. You know that the situation is binary. either it goes bankrupt or it raises capital. So you remove the central zombie zone.
you know that the next round is very close or that it doesn’t happen at all. The amounts are much, smaller, right? And the risk gap between these people and the series A that is going to happen, because it’s so close in time, the risk gap is much smaller also. So then it makes sense to… And I think that’s also when it originated with this 20 % discount, which seems to be kind of median, more or less, in convertible notes right now.
Dan (39:49)
Mm
Daniel Faloppa (39:52)
That’s when it originated because if I just need a bridge for maximum six months as the UK kind of put into law, if I need a bridge for six months, like what’s the discount that I should have? Like about 20%, you you see also 20 % in invoice discounting. like short -term loans, it’s a bit of a high rate, of course, but because it’s so short -term, you don’t end up paying actually a lot of money.
But then, the convertible morphed into SAFE, which morphed into eight SAFEs with different caps and so on. And that use of the SAFE for bridge was… Right now, it’s probably like 0 .1 % of the SAFEs, right? Everybody just uses it as a round.
Dan (40:34)
you
Mm
even perhaps getting to the point where rounds are less relevant as an idea. Like it could just be the case in the not too distant future that startups just raise SAFEs as and when they need them, like kind of rolling close.
Daniel Faloppa (41:09)
Yeah, that’s disturbing. We can model that and try to understand if it’s not disturbing. So shall we talk about what we think should happen or at least like, I think our discussion around first principles really started with how do you set a cap? That was the question that set us off, right?
Dan (41:37)
Mm
Daniel Faloppa (41:40)
Yeah. Do you want to outline what was our thinking there?
Dan (41:44)
Yeah, I think in fact, let’s kind of lead into this with both because the next data point on this chart is equally interesting, which is the percentage of rounds that are discount only. There’s also like neither cap nor discount, but I think that 1 % is probably entirely the Y Combinator most favored nation SAFEs. That could be all YC. But the discount only at 8 % is interesting.
That is because, if I can remember where I’m up to in here.
The YC template document, so like this is the original, the origin of the SAFE. YC chooses to offer a SAFE with a cap and no discount, or a SAFE with a discount and no cap, or the most favored nation version, but they don’t offer a version with both, even though that’s more popular. A SAFE with both clauses is 30 % of SAFEs
Whereas a SAFE with just a discount is only 8%. So why do they offer that and not the combo? That was the question that I think led me mostly to start thinking about all this. And that gets into the purpose of the discount as well. Maybe we could go into that a little bit before we get into the analysis of how we think you should approach both.
So the discount essentially, my best read on why you would have a discount only SAFE is basically where you can’t, the process of calculating a reasonable cap just isn’t practical. You have a ton of immediate risk. You’re developing a new product that needs testing and certification, or you’re developing a new drug that needs taking through clinical trials.
You’re prototyping some new technology that isn’t yet proven, but if it is, will be revolutionary. All these things, it’s very difficult to set a cap because you don’t know what the outcome is going to be. Could be that your trials fail. Could be that you pass with flying colors. How do you set a cap that accommodates both use cases? You can’t really. So in that case, the discount allows you to give investors that preferential pricing for taking the risk by investing earlier.
But regardless of what your price round valuation is, they get that benefit. Whether you have gone through the roof because everything has worked brilliantly or whether you need more time and more capital to get there, either way, they still have that benefit.
Daniel Faloppa (44:35)
Yeah, it’s less punishing for founders with this when they have this incredibly incredible upside plays, basically. Yeah, which, like, in a sense, the counter to that, right, is that, like, you set the cap to cap exactly that, to cap how high.
the play goes. But this is why I think there needs to be a model because they play off of each other. In the end, are two clauses of the same deal, spreading returns to two parties.
Dan (45:13)
Mm
Daniel Faloppa (45:16)
Yeah, so that’s an interesting view, I think, of the discounts, right? It’s very difficult to set a cap, so you should prefer a discount.
And then I think what we were saying is, okay, where it’s easier to set a cap because it’s like a more commodity, SaaS thing, like it’s already a market that had like four funding rounds for the same thing. And like it has some companies in series A that maybe have some published valuations or so. Then, or at least the market size is known, there are, the uncertainty has a massive spectrum, right? So when there is a bit less uncertainty,
Dan (45:56)
Mm
Daniel Faloppa (45:56)
you can set a cap that makes sense, then at that point, you can set a cap. And in my opinion, when you see 60 % of convertibles that are only cap, those are the ones, right? Because as a founder, I would never agree on a only cap for like a deep tech thing that could be…
nothing and could be sold as a patent for 20k or it could be like the next, you know, I don’t know, machinery for discovery of diamonds, right? But if I am doing a SaaS startup that like we know that is going to go into a series A between 10 and 20 million and you want to set a cap at 20, you know, fine by me, right? So that’s what we were…
Dan (46:22)
Mm
Daniel Faloppa (46:50)
reflecting on.
Dan (46:52)
Yeah, if you think about the example of Mistral, which I was like, they raised their seed round on the promise that they would, you know, basically that they were going to be able to develop a large language model that would challenge open AIs or, know, potentially be like the European equivalent to open AI, which the upside, if it works, is immense. Maybe it doesn’t, but how would you possibly approach
setting a cap for that seed round if they went that route it would be incredibly difficult and they ended up raising you know I think it was 130 million at a valuation of you know hundreds of millions if not over a billion which is so far off any cap at seed like it’s you know it’s out in space somewhere.
Daniel Faloppa (47:45)
Yeah, nobody’s going to agree on like 1 .5 billion cap. And to be honest, maybe nobody should agree on a convertible of more than 100 million in investment amount, but that’s another story. But yeah, they definitely broke some record. What’s crazy for me also is something that I didn’t even think it was possible until…
Dan (47:50)
You
Daniel Faloppa (48:12)
you researched it is the fact that the discount is fixed. So it’s not time dependent, right? It’s not 20 % per year in between the convertible and the conversion, it’s just 20%, right? So if the convertible converts in five years from now, investors versus one year from now, investors make the same return.
Dan (48:16)
Mm
Daniel Faloppa (48:37)
But per year, they make a substantially lower return when you do the fundraising five years from now. And we go back to the problem of leverage when the company is zombie and it doesn’t really raise or go bankrupt. So that for me is also incredible. Because for this type of plays that have this extreme uncertainty that you cannot set a cap.
Like at the same time, in my opinion, you cannot set a fixed discount because if it’s a deep tech, it could be going to market next year because they managed to fix all the problems and to find out the new theory, whatever. But it could go to market 10 years down the road, like 15 years down the road. So then if the discount is like 30 % stock, doesn’t matter when it happens. Yeah.
Dan (49:10)
Mm
Daniel Faloppa (49:34)
Like it’s for me as an investor would be probably unacceptable Right and that’s where we started looking into into actual models for this
Dan (49:47)
Yeah, so the cap, if you raise on a convertible with a cap, as your company grows over time, you’re going to feel like the pain of that dilution growing when you finally convert. With the discount, with the flat discount, that’s not quite the same case. So, yeah, I think we started the conversation quite a few weeks ago now.
asking the question, first of all, like on the basis that a flat discount doesn’t make sense, which I think is logical. What then do you use to determine what the discount should be? And you had the, I think, fairly genius idea, at least to me, of tying it to the required ROI for venture capital. So looking at the…
returns that investors expect to make over time. it accumulates or compounds year to year or even month to month if you want it to be a little bit more granular. using that to basically provide, the outcome is a SAFE that has many of the attractive qualities that SAFEs are supposed to have in terms of simplicity and raising capital early.
doesn’t require any negotiation. All you have to agree on is what stage of development is this company at and therefore what is the required ROI for that stage, which should be fairly simple to understand on both sides. And then there is simply a percent that is the result of that. And that’s what it would always be for any company at that stage and it ensures investors are rewarded. Like it’s very elegant as a solution.
Daniel Faloppa (51:45)
Yeah, yeah, that’s like, I mean, if you want to be extremely.
specific and extremely annoying on these things, right? The discount should become lower and lower as the company grows because the risk of the company also becomes lower and lower. like this high discount would, high discount or like fixed discount, which as the company matures becomes higher, should…
should work quite well. It removes exactly. So it removes the problem of trying to estimate. It makes a true convertible, right? Because if we make a convertible that only has a cap, we might as well make a price round, right? Because the negotiation on that cap is going to be the same as a negotiation on a price round, right? The only thing that it does, but again, it depends how you set that cap, is it gives an advantage to investors.
Dan (52:32)
Mm
Daniel Faloppa (52:51)
because they’re gonna get more percentage if the company doesn’t get to the cap, but that depends on how it depends strongly on how that cap is gonna be set. And if everybody has the right information, the cap is gonna be set right. So if there is no practical advantage, if there is no investor protection because the SAFE is not alone and it doesn’t have much capital protection either way, and you wanna go for an only cap SAFE, then…
Dan (53:05)
Mm
Daniel Faloppa (53:20)
you might as well go for a price round, right? Yeah, the alternative, like, okay, there is an incredible amount of uncertainty. We want to reward the early investors. We don’t want to set the valuation. yeah, this way, in my opinion, would work quite well. Let’s agree on a discount, which is compensating investors for the risk that they have at the moment.
And there is enough data, like the data that we use to calculate these discounts based on the risk of the company is the successful rate of investor portfolios plus the returns. Like those are the two things that you need, right? How many startups actually succeed at a certain, you know, precede or at a certain stage of risk. And what is the required return? What is the return that investors have made at that stage also, right? And…
And with those two information, you can calculate what is the required return of each single investment that investors make at that specific level. So we have it just to just, I like concrete numbers, but we have it at around 80 % for startup stage or something like that. That’s the…
Dan (54:35)
Yeah, the required ROI
for startup stage is 89 .12%.
Daniel Faloppa (54:40)
Exactly.
So what does it mean? Right. Startup stage in our questionnaire is defined as startup companies that still have revenue lower than 200K dollars, broadly speaking. So it means that if I invest in one of those companies, I want my capital to increase by 89 % every year. Sounds crazy. Yes. But that’s because as an investor in these early stages, I invest in 10 companies.
Nine of them go bankrupt and that single one that goes very well, it needs to pay me back for all the ones that go bankrupt. So that’s why the single startup needs to at least expect very, very high returns. So if we use that 89 % return on investment to calculate what would be the discount, which is the reverse, is one divided by…
what would be the discount on convertible notes, we come up with those numbers that you have there,
Dan (55:45)
Mm -hmm. Yeah, it’s interesting, because if you look at, know, a part of the process of putting these numbers together was to include, you know, what is roughly like a median case, just so people can understand the expectations and the outcomes. So if you consider, as we said before, it’s roughly two years to get from C to Series A. Let’s say 21 months is roughly the median.
So then you’re looking at a discount of over 60%, which sounds extreme, know, compared to the quote unquote median of 20%. Why would you ever go as high as 60? But if you look at the actual outcome, the like adjusted price, it’s roughly what a median cap is. So it’s what you would have got anyway, but it’s, you know, the same outcome, but with much more flexibility on either side. If you’re in that
kind of outlier bucket, you know, if you’re one of those companies that has achieved, you know, clinical trials for a new wonder drug, then you’re in that outlier scenario and now your dilution is down to 14%, you know, and your adjusted price is 24 million. So it’s just much more practical. that, company in that situation now looking to raise money, you know, much more money to grow incredibly quickly would struggle more.
if they had the greater dilution that would have been applied by a cap in that case.
Daniel Faloppa (57:16)
Yeah,
yeah. And just to clarify that, that’s the total discount over that time period. When you look at the yearly discount, mean, we’re fairly close, but then it will be a little bit less than the 50 % over 12 months, which is definitely higher than what seems to be average median now, around 20%, 30%.
Dan (57:25)
Mm
Yeah, correct.
Daniel Faloppa (57:45)
but it doesn’t have a cap. And we’re talking about startup stage anyway. depends again, it’s going to depend on the traction is going to depend on the risk of the company and so on. And it’s going to vary quite a bit. But let’s say if the company has no revenue, like prelaunch or stuff like that is going to be even higher. But that’s just like, you know, what what the math comes out to. And it looks like, yeah, when we look at average cases, it looks like it checks out.
Dan (58:14)
Mm
Daniel Faloppa (58:16)
So even if it sounds like a lot, when you remove the cap and when you think about it from first principles, it seems like this could work. And it could, yeah, as you said, simplify a lot the whole discussion.
Dan (58:34)
It’s really worth emphasizing that the median 20 % that people are kind of fixated on is a product perhaps of the original intention of the SAFE to be converted within a year or so perhaps, in which case the 20 % makes more sense. Or, or and perhaps, it’s also a result of the fact that discounts are most commonly combined with caps.
So they are like a backstop on the cap. And if you take the cap away, you know, that’s the with the disc.
Daniel Faloppa (59:05)
Yeah, exactly. Yeah. Yeah.
Because if you’re raising in
six months and you kind of have no other choice, then you don’t even need to set a cap. I mean, what’s the probability that the company does something so extraordinary in less than six months to warrant a cap? So historically, probably, was like, cap, 20%, 30 % discount, because in six months, you’re going to be raising either you’re going to be raising or you’re bankrupt, and we’re done.
we move into like one year or so and then investors are like, well, if I give you the money for one year, there might be a situation in which the company really explodes and I’m gonna like lose all my money with a 20 % discount. Fair enough. So let’s put a cap, right? Rather than probably go and change that anchored 20 % that was already anchored in the heads of everybody, right? So it’s, yeah, I think it’s very interesting. And by no means these are…
Dan (59:53)
Mm
Daniel Faloppa (1:00:09)
the final numbers, right? It’s just like we try to run it with the data that we have and like with the medians and so that we could find around. But the idea I think would be to really open this discussion and like, should we move from these very complicated and not very useful saves that like went astray to have only caps?
to like actually bring it back, try to really understand what that discount should be, what is the required return, which is actually a lot more interesting, I think, as a measurement for investors as well. And shift that discussion. And then in that case, we can have simple instruments, I would say, that make sense.
Dan (1:00:57)
Yeah, and to be clear…
We’ve spoken to founders in these kinds of situations. Within a day of posting a comment about this on LinkedIn, I was contacted by a founder with a medical device startup who has exactly this problem, which is he’d spoken to his lawyers about structuring a SAFE, decided that the most logical way to do so was with a discount, a higher discount than the typical 20 % as well. But every investor he spoke to didn’t understand. They were just like,
we do not invest in SAFEs without caps because it has become the standard and uncapped SAFEs I think were unfairly associated with, you know, of Zip era investing and runaway valuations, even though there’s not really any indication that uncapped SAFEs became any more popular during that period. Yeah, I think they just have a bad legacy because some investors have been burned, but they’ve been burned because they use that 20%.
flat discount without a cap. And that is obviously quite often going to lead to outcomes that aren’t ideal for them.
Daniel Faloppa (1:02:09)
Yeah. I mean, it all depends on how you set it, right? I think a lot of the times when the standards that don’t have a model behind them are used for reference is because they are convenient, convenient in the sense that they make more money for the person citing them, right? So, yeah, I don’t know. Like, if you can…
Dan (1:02:29)
Mm
Daniel Faloppa (1:02:38)
claim that the 20 % discount is very bad for you and it’s very little, but then you can, because of that, put a cap that is incredibly low and then own a very large percentage of the company. That’s also convenient. So there might be a bit of resistance there in that sense, but…
And that’s why I would say the theory should be first. And this is at least a more understandable theory for these things rather than, cap is a backstop for a runaway valuation, but we don’t even know what a runaway valuation is. At the same time, we only want to invest in companies that do have a runaway valuation because those are the best companies. Yeah, it’s difficult.
Dan (1:03:06)
Mm
Well, yeah, this is risking me going off on a little bit of a tangent, but like investors that are willing to do the work and put the thought in to come up with the right terms that suit a founder and fit the scenario, whether that’s a cap or a discount and how they set it, like to be thoughtful and like scenario specific about it. Like I think that’s one ideal.
The other end of the spectrum I don’t mind as well, which is, you know, there are investors out there that say, we invest in founders, you know, whenever like at seed stage and we invest 500K for 10%. And that’s it. That’s all we do every time. And I don’t mind that. Like they’re then obviously selecting for a specific type of company with a certain amount of growth. And that’s fine.
but it’s the ones in between where they’re kind of pretending to do the work, but actually they’re just using convenient caps or whatever it may be to obfuscate all of this and pretend they’re doing something when really they’re not. That’s where I have a bit of a problem.
Daniel Faloppa (1:04:38)
Yeah. And it happens.
It happens. It’s not unheard of. mean, we saw models done by investors, more like on the buyer’s side. That’s even stronger, I would say. But where everything was picked because it was the lowest valuation result possible. So the most convenient valuation result possible. So selection of methods, selection of comparables, selection of which multiple to use.
selection of… everything was picked under, like behind the curtain of theory -based and knowledge and valuation knowledge, everything was picked in the advantage of a specific party. And it does happen, right? So that’s also something that, yeah, that we need to be aware of. Like theory can be used just to…
Science can be used as an excuse and then still get the best result out of things.
Dan (1:05:46)
Yeah, the most important thing is that people approach these questions honestly from as much of a first principles perspective as possible. And echoing what you said before, this is kind of our proposal based on what we see and what we think makes sense. I would love if anybody is listening and has got this far to leave comments about what they think of this. If they have other ideas as well, that would be fantastic. We’d love to hear them.
we are always looking to learn more and improve these things as much as we can, rather than stick with the convenient and the dogmatic.
Daniel Faloppa (1:06:26)
Yeah, indeed. Awesome. I think that’s a great conclusion.
Dan (1:06:31)
Well, we have one last part to draw to a close on. know we’re dragging on over and out now, but maybe to finish just a quick look at the determining the cap. So this is something we also talked about. And I think this one is in philosophy slightly simpler. So our approach here was basically to.
to look at a current valuation of the company. So this is based on the Ecuador methodology, looking across the five methods that include qualitative characteristics, verifiable factors of the company, and also future cash flows as well through the DCF methods, a combination of different perspectives. And to determine a cap for a company that has that more predictable future.
you can quite simply look at what the high bound of that valuation would be. What’s the optimistic case presented by that valuation? And that roots the cap in the reality of your company, but builds in the fact that you’re talking about a cap rather than a valuation. It’s in the future, not today.
Daniel Faloppa (1:07:48)
Yeah, but like important to specify, right? This is the first principle theory when you look at the cap without a discount, right? Cause like, yeah. So like the question is, okay, what, like how do we determine like the best cap, right? How do we determine the right cap from first principles, right? And then like,
Dan (1:07:54)
Mm
Correct.
Daniel Faloppa (1:08:13)
People go, well, the valuation of the next round. Well, it cannot be. These investors that are investing now need to be compensated more. So they need to have a lower valuation compared to the valuation of the next round. So then you go, okay, then cap and discount. Well, no, because of everything that we said so far. So if you really wanted to set just a cap, then what should be the theoretical framework for it? And what we were thinking about is, okay, it should be…
an optimistic valuation of the company, but right now, because the investor is investing right now, right? And how do you calculate like a, know, because it’s a cap, right? It’s a top bound, let’s say. So we were like, okay, the one possible way is the higher bound of the equity valuation, which is basically a…
the, we calculate the range every time we calculate the valuation, the range is calculated on the variance of the five methods. So it’s almost the high bound is optimistic in the sense that it looks at, it relies more heavily on the methods that are a bit higher in a sense for that specific valuation, right? Cause again, no two methods are gonna yield the same valuation. So this gives you a quite scientific current optimistic valuation.
Dan (1:09:32)
Mm
Daniel Faloppa (1:09:39)
of the company, which could be set at the cap. Then the question again is like you’re doing the whole work for a full -fledged valuation. You have it, you have the price per share, you have everything. Why would you do a SAFE, right? A convertible maybe has loan protection like yada yada what we discussed, but the SAFE at this point, if you do have the valuation, I would say just do a price round. But again.
Dan (1:10:04)
Mm
Daniel Faloppa (1:10:07)
On this one, we have a little horse in this race, but still, yeah, I don’t know. Maybe there are other reasons that I don’t see. of course, one reason is if investors are extremely familiar with convertibles and you’re going to get the same terms, but they’re going to be easier to negotiate than by all means. But otherwise, physically, in terms of first principles,
Dan (1:10:09)
Yeah.
Daniel Faloppa (1:10:36)
there shouldn’t be any reason to not go for a price round.
Dan (1:10:41)
Yeah, and there are some interesting arguments for that. I mentioned before with the interview, which I will link in the description down below for people to check out. So interesting comments from a VC about why they prefer price rounds, which is worth considering as a slightly contrarian perspective.
Daniel Faloppa (1:11:02)
Awesome.
Dan (1:11:04)
Perfect. Well, I think that’s all of the data and probably that’s more than enough thought and discussion and analysis to drive most people to sleep. and I almost forgot. I was gonna wear this.
Daniel Faloppa (1:11:18)
Ha ha.
nice! I wanted to buy one too.
Dan (1:11:26)
Shout out to the pitch show.
You should do. should do. We should find one that like promotes price rounds maybe.
Daniel Faloppa (1:11:36)
Yeah, that’s true or fixed discounts, yearly discounts.
Dan (1:11:45)
Yeah, that’s getting really niche.
Daniel Faloppa (1:11:49)
Awesome. Thanks, Dan. This was very interesting. think it’s very interesting for an array of people, hopefully. And if we manage to together understand what are the sticky points of the theory and come up with better and better solutions, we help the whole environment and the whole innovation environment as well, which in these days is very much needed.
Dan (1:12:12)
Yeah, and as we said a couple of times already, these are just proposals and we would love to hear from other people about their perspectives on this.
Daniel Faloppa (1:12:22)
Awesome. Thank you everyone. See you next time.
Dan (1:12:26)
Thank you.