Not true. The full ratchet is implicit in the deal. If the deal said $8m cap and... | Hacker News

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		msuster on Sept 6, 2012 \| parent \| context \| favorite \| on: The Truth About Convertible Debt and The Hidden Te... Not true. The full ratchet is implicit in the deal. If the deal said $8m cap and next investor invests at $4m then the deal gets done as $4m and doesn't impact the next investor. It comes out of founders' equity. It is the "equivalent" of a full ratchet but disappears after the deal is done.

jpdoctor on Sept 6, 2012 [–]

> It comes out of founders' equity

And how is the next investor incentivized to let that occur?

Edit: I should be more explicit. The next investor is anti-incentivized to let it occur, which is why it gets negotiated away by sensible investors.

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