Paul Graham coined “high-resolution financing/fund-raising” in 2010 when convertible notes were just getting popular.

Often, investors ask who are the other people putting in their money. Since people rarely want to be the first mover and that too, when you’re probably at an idea/early POC stage, it might be difficult to identify the lead investor. Graham writes that the beauty of the convertible notes is to give different prices to different investors, thereby rewarding those taking more risk. This variable pricing is termed “high-resolution fundraising”. Simply put, this means giving different caps or discounts to investors in a round such that as the round fills up, the first one to take the leap is being incentivized and the last one gets a comparatively less favorable deal. The easiest way to adjust the cap and discount at high resolution during a round is to use a linear model.

The pros would be obvious by now. However, many founders are still doing low-resolution fundraising using high-resolution convertible notes. Here’re a few points on that -

► Not enough live-cases or information - For example, I know a little about this topic that I am writing about but I am not knowledgeable enough to pull this off.

► Higher legal costs in the subsequent round - The whole point of using convertible notes was less legal costs and hassle involved. As you approach investors, you might need to set up a cap table.

► Explaining to investors - Since this is still non-standard, your next set of investors might ask why the previous investors got better deals (rationalizing the reason might be difficult).

If you know someone, who has pulled this off before, do connect!