What is a “Discount” and a “Valuation Cap” in a convertible note?

• Valuation Cap: Sets a maximum valuation at which the investor’s debt will convert into shares, protecting them against inflated valuations in the next funding round.
• Discount: A percentage reduction (usually between 10% and 25%) applied to the price per share of the next funding round to reward the early investor for taking on greater risk at early stages.

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