discount rate

Definition

The percentage discount early investors get when their notes convert to equity, rewarding them for investing before a priced round. It's the early bird special of startup investing, typically 15-25%.

Example Usage

Our convertible notes have a 20% discount, so if the Series A prices at $10/share, note holders convert at $8/share.

Origin

Convertible debt structuring from corporate finance

Fun Fact

Discount rates and valuation caps can both apply to the same note, with investors getting whichever deal is better—maximum protection for their leap of faith.

Source: Convertible note and SAFE structuring terminology

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dragalong rights

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