Discount (on a SAFE or note)
A percentage reduction on the priced round's share price, rewarding the investor for coming in earlier.
Example
A 20% discount on a $1.00 share price means the SAFE converts at $0.80.
Important
When a SAFE has both a cap and a discount, the investor gets whichever is better for them, not an average of the two.
Related terms
- SAFE — Simple Agreement for Future Equity — an investor gives money now in exchange for shares later, when a priced round happens. It is not a loan and has no interest or maturity date.
- Convertible note — A loan that converts into equity at a future priced round, usually with a discount and a valuation cap. Unlike a SAFE it carries interest and a maturity date.
- Valuation cap — The maximum valuation at which a SAFE or note converts, regardless of what the priced round is actually done at.
Lessons that explain it
- SAFEs and convertible notes — How most first money is raised now — fast, cheap, and much easier to get wrong than founders expect. (15 min)
All 176 terms in the Founder glossary