4 ms·
no need for a discount if there's a cap. Discount is nice if you don't want to try and set a cap/price, but if you're OK setting a cap then it effectively grant
by daniel_levine 8y ago
no need for a discount if there's a cap. Discount is nice if you don't want to try and set a cap/price, but if you're OK setting a cap then it effectively grants a discount
- simonebrunozzi 8y agoIncorrect. A cap means that above the cap, no discount matters. Below the cap, however, the discount is applied. Example: raising 1M at 10M cap, 20% discount. Scenario 1: next priced round at number below 10M - the cap doesn't apply, the discount does. Scenario 2: next priced round at number between 10M and 12M - the cap doesn't apply, the discount does. Scenario 3: next priced round at more than 12M - cap applies, discount doesn't. In short, either cap OR discount are applied, whatever is the most beneficial to the investor.
- deleted 8y ago[deleted]
- jasonkwon 8y agoI think Daniel was working off of a different understanding of 'discount.' I think he meant a discount off of the price of the next round (Series A). If the Series A is $30M pre but you set a valuation cap on the safe of $20M post, you are getting a 'discount' on the conversion of the safe in the Series A (because it is lower than $30M pre). You're right though that there's a flavor of safes that contain both a discount and a valuation cap, and the investor gets the benefit of whichever approach results in more shares, and your explanation is good.