Depending on whom you ask (Investors or Founders), Capped notes have a different set of negatives.
From the article, this new financial instrument is attempting to solve the problem that Convertible Debt has a set of restrictions: term limits and interest rates close to market rates. This causes lead to complications, when the note converts, or when the term expires.
This solves it by no longer issuing "debt", but instead the right to buy stock at an agreed price. This is similar to a Warrant, which is typically used for advisor compensation.
From the article, this new financial instrument is attempting to solve the problem that Convertible Debt has a set of restrictions: term limits and interest rates close to market rates. This causes lead to complications, when the note converts, or when the term expires.
This solves it by no longer issuing "debt", but instead the right to buy stock at an agreed price. This is similar to a Warrant, which is typically used for advisor compensation.