Since QSBS only kicks in after holding for 5 years, and the highest likelihood of a profitable exit in my portfolio has been 4-7 years from first investment, holding a note for ~1 year at the beginning substantially lowers the chance of getting QSBS treatment
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QSBS means you pay *no* federal cap gains tax (and in some states, no state cap gains tax) on gains up to $10 million. This means your after-tax gain can be ~30%-50% higher with QSBS
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The expected value of QSBS can then be more than the 20% discount on most converts/SAFEs. This means you are essentially getting the same return as investing in the equity round even though you are taking more risk. This is just stupid.
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I don't know. Maybe I'm just thinking about this wrong. Would love others' thoughts
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So your main argument comes down to is time held from SAFE conversion to exit > 5 years? For me, I think there are too many assumptions for E(X). Unless one can round up enough empirical data. But then again empirical data may be useless for a super small portfolio
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More restrictive than that, actually. SAFE to exit has to be between 5 years and 5 years+time to SAFE conversion. I'm using empirical data yes Empirical data is always useful. What's your assumption on % of profitable exits in years 5-6?
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I never understood why YC didn’t invest in making standard preferred paperwork easier instead.
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Why isn’t this: answers these 10 questions, here’s a form, if there exceptions call a lawyer with these followups
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Anybody know if you can still get QSBS treatment with convertible notes or does the same principal apply?
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Čini se da učitavanje traje već neko vrijeme.
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