As mentioned in another thread, I like this. Instruments that look like debt (terms and interest rates) generally are the instruments of lower risk investors. Linking them to equity is the game of wall street arb desks. Turning the instrument into a warrant is more in lines with high stage early equity investing - giving folks an option on a potentially large upside.
I would have used these a few years ago, and would in the future. This is now my convertible notes worked out so far, in practice - we offered to pay them back, or let them continue indefinitely, after they expired.
They were written as classic notes, for just friends and family, but we haven't raised yet. We dealt with the expiration in a non-official way, via email - basically like a SAFE, but still accruing interest. If my investors weren't as close as they are, or if it would have been more money, this might have been an expensive issue to deal with.
Even without formal interest, some incremental benefit over time, if a funding takes longer to convert than expected, seems justified.
Has anyone considered a gradually decreasing cap as a way to simulate the time-varying rewards usually delivered via interest? (That is, decay-the-cap rather than grow-the-principal.)
