

Discount or cap? A spreadsheet that shows what happens when a note converts. - rbedi
http://rajibedi.tumblr.com/post/27034332353/discount-or-cap-a-spreadsheet-that-shows-what-happens

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nchuhoai
Not that I am even close to an expert, but I didn't kno that cap and discount
were mutually exclusive. Does that mean if the valuation hits the cap, the
discount does not apply? Can anybody confirm this?

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rbedi
The language in a typical note (as quoted from here:
[http://techcrunch.com/2012/04/21/convertible-note-seed-
finan...](http://techcrunch.com/2012/04/21/convertible-note-seed-financings-
econ-101/)) is:

"..conversion price will be the lower of (i) the price per share determined by
applying the discount to the Series A price per share; and (ii) the price per
share determined by dividing the cap by the Series A pre-money valuation."

But this doesn't mean "if the valuation hits the cap, the discount does not
apply" because even if the valuation is higher than the cap, the discount may
still be more beneficial. So there is a gray area. If you change cell C19 to
$3,500,000, for example, you'll see that the discount still applies, and not
the cap.

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alexschiff
I saw this when it was posted on his blog...extremely helpful. Probably the
most succinct "when x happens y happens" spreadsheet I've found when dealing
with C-Notes.

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rbedi
Glad to hear that it is helpful!

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andrewhillman
does anyone have a google docs version of this spreadsheet?

