Conversion Discount
A percentage, typically 10 to 25%, off the next round’s price per share at which a SAFE or note converts. Where an instrument carries both a discount and a cap, it converts at whichever produces the lower price, so the discount only matters when the round prices below the cap. A discount without a cap gives the early investor no protection against a very high round price.
How a startup is financed · 12 of 26Next: Advance Subscription Agreement (ASA)
Practise it
Take a company from founding through a SAFE and a priced seed round. Set the cap, the pre-money and the option pool, watch the price per share and every holder’s stake move, then check your own arithmetic against the table.
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