Valuation Cap vs Discount Rate — Which Protects Investors More?

Your convertible note has both:
- a valuation cap
- and a discount rate
The investor takes whichever gives them more shares.

Many founders think valuation caps and discount rates are interchangeable.

They are not.

In this video, I explain:
- What a valuation cap is
- What a discount rate is
- How investors choose the more favorable conversion outcome
- Why caps often create much larger dilution for founders

Example:
Series A closes at an $8M valuation.
- $4M valuation cap
- 20% discount rate
The investor compares both outcomes and automatically takes the better deal.

Lower conversion price = more shares.

If you are negotiating SAFEs or convertible notes, model both scenarios before signing.

PakLawAssist helps startups stay legally and funding ready.

Save this before your next funding conversation.

Disclaimer: This content is for informational purposes only and does not constitute legal, financial, or investment advice. SAFE and convertible note outcomes depend on specific contractual terms and financing structures.

#StartupFunding #SAFEAgreement #ConvertibleNotes #StartupPakistan

Видео Valuation Cap vs Discount Rate — Which Protects Investors More? канала PakLawAssist – Startup Legal Help