This afternoon I met with an organisation that’s overseeing a grant opportunity. The challenge is that the funding round doesn’t close until the end of the September, and I obviously can’t depend on it either. The potential max grant is also nowhere near my financial needs even for the first product. So, I really need to become more serious about how I’m going to fund this business should everything work out okay from a product cost perspective.
My contact today mentioned notes as a funding option. I’m familiar with convertible notes which are essentially loans that turn into equity later if I bring on large investors. I’m also familiar with notes that can act as short-term loans, typically with a high interest rate. Both are certainly options that result in debt rather than giving up equity early.
Still, I was really interested in learning more about the SAFE note that he mentioned. After further research, it seems to be a newer way of obtaining financing without giving up equity or issuing debt early. Instead, it appears to offer share options at a heavily discounted rate should an equity funding round ever occur in the future.
I’ll have to ask my private equity friend about this further as this can definitely be an option, but I need to understand it much better before I can make that kind of decision. It’s really good to know that there are other ways of funding this business though.