How does the CFI Simplify Funding?
With the CFI, many investments in the entity can occur at any time during its early or seed stage, while ensuring their relative values remain equitably balanced over time.
This time based flexibility of a CFI enables and enhances the natural and powerful synergy present between a startup and its investors, while minimizing mitigating, and eliminating disparities. This remains true whether they be disparities in valuation, common with a classic equity based transaction, or disparities of downside risk found with debt or convertible note deals.
Healthy negotiation is a process fundamental and necessary to any business relationship. The CFI enhances and empowers the negotiation process, by making all of the parameters of a funding deal negotiable, while also having only well benchmarked and understood parameters. The CFI’s parameters have only well defined market value and meaning to both sides of the negotiation.
Negotiation is greatly complicated when there is little to no established market value or benchmark for a negotiated item or feature of a deal. It can be very difficult to establish the value of an early or seed stage company, it is impossible to do it precisely without the CFI. Where there is uncertainty as to the value of an equity, a seller tries to shift his ask higher to compensate for uncertainty, and the buyer tends to shift his price lower to compensate. Uncertainty of value moves parties further away from making a deal. The CFI mitigates this, removing uncertainty for all the parties involved in a startup.
Generally, startups are nearly synonymous with uncertainty. It is a credit to the tenacity and negotiation skills of founders and funders alike, that amidst all of the uncertainty, many have still managed to close deals. However, the CFI makes that outcome more likely, by removing uncertainty from the equation, not by factoring it out, but by factoring it in. It is fundamental to the CFI vision, that the CFI be a funding vehicle that helps enable deal closure, rather than building in factors that scare both sides as traditional vehicles do. It achieves this and facilitates agreement, by greatly reducing the ultimate significance of any uncertain factors, for both sides.
The CFI provides equity in exchange for investment to each pre A round investor, in accordance with a Future Perfect Valuation™, which is more equitable than anything different. The CFI uses the most equitable valuation possible, to provide the most proper balance between all early and seed stage investors, including the entrepreneur. This ideal balance gets established in the portions of pre-money valuation at A round that each investor receives at conversion to A round stock. Anything different is inequitable. The CFI is Equity…by definition™.