📓 Convertible Notes.md by @dr_kvj ☆

What does it allow us to do ?

It can let me invest into Codex without having to valuate and decide on the equity for now
It lets us wait until the [[priced round]] when another investor would want to invest with a certain valuation in mind.
At that point , the convertible notes get triggered and hence the first investor gets the [[Shares]] before the new investor .

How does it compensate for the higher risk that the early investor took ?

It gives interest on the provided investment and also a discount on valutation .
These both are to be agreed upon before closing the deal on the convertible notes
General , interest rate is 5-6% , while the discount could be from 10-25%
- More on this at https://youtu.be/njx09wXb9o0?t=623
- Ex : if i invested 10k $ , if the priced round happens after one year , my investment would be evaluated as 10.5 -10.6 k , rather than the original 10k and also if the [[valuation of the company]] is at 1 M $ , for me it would be valuated only at 75k $ .

This wouldn’t compensate enough for the risk , the early investor took , if there is a very high valuation and if the initial investment was small (comparitively)
Solution -> Putting a cap on maximum valuation !
⥅ [[Screenshot 2020-11-20 at 12.50.18 PM.png]]