Convertible Note Corporation With Valuation Cap
Description
How to fill out Convertible Promissory Note By Corporation - One Of Series Of Notes Issued Pursuant To Convertible Note Purchase Agreement?
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FAQ
The total valuation of the company after a round of financing. It is typically calculated by adding the amount of capital raised in a financing to the Pre-Money Valuation. It can also be calculated by multiplying the Post-Financing Fully Diluted Capitalization by the share price of the stock sold in the financing.
A valuation cap is a ceiling imposed on the price at which a SAFE will convert to stock ownership in the future. It is the maximum valuation at which an investor can convert a SAFE into equity: a pre-negotiated amount that serves to ?cap? the conversion price once shares are issued.
A valuation cap is used in a convertible note to give the noteholders a ?ceiling? value at which their investment will convert and, in turn, that gives them a ?floor? in regard to their ownership.
Hear this out loud PauseThe value cap is a means for seed-stage investors to be rewarded for taking on more risk. Your convertible security's valuation cap determines the highest price at which it can be converted into equity. To convert this to a share price, multiply the value cap by the series A valuation to convert this to a share price.