Convertible Promissory Note Form
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
A convertible promissory note is a debt obligation in which a company borrows money from an investor in exchange for a promise of repayment and an option to convert the outstanding principal into equity of the company upon some triggering event. Notes have a maturity date and bear interest.
The discount for the convertible note or SAFE is calculated by dividing the valuation cap by the traditional equity financing valuation and then subtracting that value from 1 (representing no discount). In this example such would be portrayed mathematically as $2 million / $4 million = 0.5 and 1 0.5 = 0.5.
A convertible note is a form of short-term debt, typically issued to investors of a company in exchange for stock at a later time. For example, it may be debt that automatically converts into shares of preferred stock upon the closing of a financing round.
A convertible note is a way for seed investors to invest in a startup that isn't ready for valuation. They start as short-term debt and are converted into equity in the issuing company. Investors loan money to the startup and are repaid with equity in the company rather than principal and interest.
In order to calculate the valuation cap adjusted price per share for convertible note holders, you would divide the valuation cap on the note by the pre-money valuation of the subsequent round and apply that to the Series A price per share.
