# Convertible notes

Convertible notes are very common for angel to seed stage companies.

# Possible criteria

Discount

TLDR: A higher discount is better for the investor.

Valuation Cap

TLDR: A lower valuation cap is better for the investor. The size of the benefit depends on the valuation of the business in the next round.

# Example scenarios

Valuation Cap Example

An investor agrees to a convertible note with a 4M valuation cap at seed stage.

  • If the startup then raises at a 12M pre-money valuation at Series A, they will be 3x better off than the Series A investor
  • If the startup then raises at a 8M pre-money valuation at Series A, they will be 2x better off than the Series A investor
  • If the startup then raises at a 4M pre-money valuation at Series A, they will be not better off than the Series A investor

# Example Template

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