Uncapped Note? No Discount? Making Sense For Entrepreneurs

3 min read

What is the right cap and discount for your convertible? Should you even have them at all? The latter used to be a very rare situation, now it is a commonly asked question. This article is to help entrepreneurs make sense. 1) Key Principles Let these serve as a reminder: Convertible notes are debt that eventually become equity. The two most powerful levers are cap and discount rate. Priced rounds are equity. Investors generally prefer priced because it gives them more certainty. SAFEs are a type of convertible that has become especially popular because of its simplicity. There are plenty…...

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Amit Garg I have been in Silicon Valley for 20 years -- at Samsung NEXT Ventures, running my own startup (as of May 2019 a series D that has raised $120M and valued at $450M), at Norwest Ventures, and doing product and analytics at Google. My academic training is BS in computer science and MS in biomedical informatics, both from Stanford, and MBA from Harvard. I speak natively 3 languages, live carbon-neutral, am a 70.3 Ironman finisher, and have built a hospital in rural India serving 100,000 people.