Glossary
Qualified Financing
A defined threshold of round size or terms that triggers automatic conversion of convertible securities — typically specified in iSAFE, CCD, or SAFE documents.
By Amit Tyagi, Fitoor Capital · AletheiaAI Glossary
Definition
Qualified Financing is a defined threshold in convertible security documents that triggers automatic conversion at the next funding round. Typically specifies: minimum total round size (e.g., ₹3Cr+), priced round (not another convertible), and bona fide outside investor (not insider round).
If a financing round doesn't meet the qualified threshold, the convertibles don't automatically convert — they can either choose to convert voluntarily at the lower-tier terms or wait for the next qualified round.
India Context
Indian iSAFE and CCD documents typically define qualified financing as ₹3Cr+ priced round in CCPS. This prevents premature conversion in small bridge rounds or insider rollovers. The threshold is usually negotiated specifically — higher thresholds favour investors (more optionality to wait); lower thresholds favour founders (cleaner cap table sooner).
Example
A founder raises ₹50L pre-seed on iSAFE specifying ₹2.5Cr qualified financing threshold. Later, the founder closes a ₹2Cr bridge round at lower valuation — not qualified. iSAFE doesn't auto-convert. When the proper ₹6Cr seed closes 8 months later, the iSAFE converts at the seed terms.
Frequently Asked Questions
Related Terms
A CCPS-based instrument with SAFE-equivalent commercial terms — the standard con…
A debt instrument that compulsorily converts to equity at a future trigger — a l…
A simple agreement for future equity — a contract that converts to shares when a…
Apply what you've learned
See this term at work on real Indian companies.
AletheiaAI checks market narratives against the filings behind them — screener, company disclosures, and sector reports across India’s listed companies, free.