Set attribute in the Convertible Note Agreement Template

Aug 6th, 2022
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Here is steps on how to set attribute in Convertible Note Agreement Template online:

  1. Create a free DocHub account or log in to your existing one.
  2. Upload a document by clicking the ‘New Document’ button or going to Documents.
  3. Use the top toolbar to set attribute in Convertible Note Agreement Template.
  4. Edit, annotate, and improve your document design.
  5. Click the right-corner Dropdown icon -> Actions and choose the option of your choice to Make a Copy, Move to Folder, or Convert to Template.
  6. Click the Download/Export to finish.

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Structuring a convertible note requires careful consideration of key elements. Typically, convertible notes feature the principal amount, interest rate, maturity date, and conversion terms. The conversion discount and valuation cap are crucial components influencing the conversion of the note into equity.
Convertible notes are promissory notes that serve an additional business purpose other than merely representing debt. Convertible notes include all of the terms of a vanilla promissory note, such as an interest rate and the pledge of underlying security (if applicable).
Change of Control: If the company is sold before a Qualified Financing takes place, a convertible note may provide that the amounts outstanding on the note will either: (i) convert into common stock at an agreed upon Cap immediately prior to the Change of Control (so that note holders can share in sale proceeds as
The valuation cap is calculated by taking the total amount of money that is being raised in the round, and dividing it by the number of shares that are being sold. For example, if a company is raising $10 million in a round, and is selling 20 million shares, the valuation cap would be $0.50 per share.
Apply the desired ownership percentage: Multiply the post-money valuation by the desired ownership percentage to determine the valuation at which the convertible note will convert into equity. This value represents the valuation cap.
A convertible note cap sets a maximum valuation at which the investment made via the convertible note can convert into equity. Investors in the convertible note typically get converted at the lesser of the valuation of the next qualified priced round and the cap.
Valuation Cap: SAFE Price = Valuation Cap / Company Capitalization. Discount: SAFE Price = next round price * (100% discount) Valuation Cap + Discount: Whichever of the above calculations results in more shares of preferred stock.

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