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In overly simplistic terms: That $50 would be converted into stock at the time of their next fundraising. Uncapped means there is no cap on the valuation at th
by wilfra 14y ago
In overly simplistic terms:
That $50 would be converted into stock at the time of their next fundraising. Uncapped means there is no cap on the valuation at the time of the next round. So if one of the founders raised money at a $100,000 valuation later, the $50 investor would get 50/100,000th of the shares.
If it were capped, say at a $50k valuation - the investor would get 50/50,000th of the shares, regardless of the valuation.
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- obilgic 14y agoWhat if they don't raise any more, and start to make profit immediately?
- jarek 14y agoThanks! I'll reiterate obilgic's question since I don't know if your showdead is on: what is the ownership situation before, or in absence of, subsequent fundraising? Would a company be considered automatically split into some number of shares at some point?
- wilfra 14y agoThen it's typically a loan with a pre-defined interest rate. A convertible note does not buy equity - thats what 'convertible' means - and 'note' means 'loan'. So it's a loan that can convert to equity based on certain conditions. As I said, all of this is overly simplistic. It's just a 30,000 foot overview.
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