# Qualified Financing

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

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## 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.

## Related Terms
[**Most Favored Nation (MFN)**  
A provision guaranteeing an investor will receive terms at least as favorable as any subsequent investor receives.  
Learn more](/content/terms/most-favored-nation-mfn/index.html)

[**Maturity Date**  
The deadline by which a convertible note must be repaid or converted to equity.  
Learn more](/content/terms/maturity-date/index.html)

[**Accrued Interest**  
Interest that accumulates on convertible notes over time, typically converting to additional equity.  
Learn more](/content/terms/accrued-interest/index.html)

## 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](/content/blog/safe-stack-multiple-safes-cap-table-dilution/index.html)

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