Qualified Financing | Futureproof

Qualified Financing

Quick Definition

The minimum raise amount that triggers automatic conversion of convertible notes or SAFEs.

What is Qualified Financing?

Qualified financing is a threshold (typically $1M-$2M) that when crossed, triggers automatic conversion of convertible securities. It ensures conversions happen in meaningful funding events, not tiny bridge rounds.

Setting the Threshold

The threshold should be high enough to indicate a real round but low enough that you can realistically raise it. Too high and you might need to negotiate conversions; too low and small raises trigger unwanted dilution.

Below-Threshold Raises

If you raise less than qualified financing, convertible holders don't automatically convert. This can create messy cap tables with multiple unconverted instruments. Negotiate conversion terms if this happens.

Formula

Typical qualified financing thresholds:

Seed SAFEs: $500K-$1M
Convertible notes: $1M-$2M
Later notes: May specify Series A specifically

Example

SAFE terms: $200K, converts on qualified financing of $1M+.

Scenario 1: Raise $1.5M Series A. Qualified financing met. SAFE converts.
Scenario 2: Raise $600K bridge. Below threshold. SAFE remains unconverted, still outstanding.
Scenario 3: Raise $300K then $800K. Neither is qualified. SAFEs still outstanding until a $1M+ round.

Maturity Date
The deadline by which a convertible note must be repaid or converted to equity.
Learn more

Accrued Interest
Interest that accumulates on convertible notes over time, typically converting to additional equity.
Learn more

Learn More About Qualified Financing

Fundraising How Multiple SAFEs Dilute Your Cap Table
Learn how stacking multiple SAFEs with different valuation caps creates unexpected dilution. Discover the conversion mechanics most pre-seed and seed founders miss.
Read article

See These Metrics in Action

Futureproof automatically tracks MRR, ARR, churn, runway, and more — so you can stop calculating and start scaling.