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COMPANY NAME SUMMARY OF PROPOSED TERMS FOR CONVERTIBLE PROMISSORY NOTE FINANCING The following is a summary of the basic terms and conditions of a proposed convertible promissory note financing of.

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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.

How to determine your valuation cap the amount you're raising on the convertible note (say $500k), the conversion discount of the note (say 20%), the pre-money valuation cap of the note (say $4m), the percentage of your company which the VCs will take in your Series A (say 30%),

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.

A convertible debt cap, also known as a valuation cap, is the maximum amount at which an investor will change his or her investment into equity.

Although it is customary to forego a term sheet, in some cases it may be required if the parties need to negotiate certain terms. It can be advantageous to use a term sheet for the company to easily summarize the terms of the notes for potential other investors purchasing a convertible note.

Valuation Cap: In addition to the conversion discount, convertible notes also typically have a valuation cap, which is a hard cap on the conversion price for noteholders regardless of the price per share on the next round of equity financing.

A convertible note is a short-term debt agreement that converts into equity at a future date. Usually, this happens when one of these events takes place: The company raises enough capital to reach a pre-determined benchmark. The term of the loan expires.

A term sheet for a convertible note is a non-binding agreement among startups and investors. We use it during a funding round; and it sets the ground for the legally binding documents that will follow, once both parties have come to an agreement.

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© Copyright 1997-2025
airSlate Legal Forms, Inc.
3720 Flowood Dr, Flowood, Mississippi 39232
Form Packages
Adoption
Bankruptcy
Contractors
Divorce
Home Sales
Employment
Identity Theft
Incorporation
Landlord Tenant
Living Trust
Name Change
Personal Planning
Small Business
Wills & Estates
Packages A-Z
Form Categories
Affidavits
Bankruptcy
Bill of Sale
Corporate - LLC
Divorce
Employment
Identity Theft
Internet Technology
Landlord Tenant
Living Wills
Name Change
Power of Attorney
Real Estate
Small Estates
Wills
All Forms
Forms A-Z
Form Library
Customer Service
Terms of Service
DMCA Policy
About Us
Blog
Affiliates
Contact Us
Privacy Notice
Delete My Account
Site Map
Industries
Forms in Spanish
Localized Forms
State-specific Forms
Forms Kit
Legal Guides
Real Estate Handbook
All Guides
Prepared for You
Notarize
Incorporation services
Our Customers
For Consumers
For Small Business
For Attorneys
Our Sites
US Legal Forms
USLegal
FormsPass
pdfFiller
signNow
airSlate workflows
DocHub
Instapage
Social Media
Call us now toll free:
1-877-389-0141
As seen in:
  • USA Today logo picture
  • CBC News logo picture
  • LA Times logo picture
  • The Washington Post logo picture
  • AP logo picture
  • Forbes logo picture
© Copyright 1997-2025
airSlate Legal Forms, Inc.
3720 Flowood Dr, Flowood, Mississippi 39232