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--- business:funding:safe_discount_rate_explained [2023/10/09 01:31] – wikiadmin
+++ business:funding:safe_discount_rate_explained [2023/10/09 02:06] (current) – wikiadmin
@@ Line 27: / Line 27: @@
 . Calculate the discount amount:
-   \[ \text{Discount Amount} = \text{Investment Amount} \times \text{Discount Rate} \]
+Discount Amount = Investment Amount x Discount Rate
-   In this case, the investment amount is $100,000, and the discount rate is 20% (0.20):
+In this case, the investment amount is $100,000, and the discount rate is 20% (0.20):
-   \[ \text{Discount Amount} = $100,000 \times 0.20 = $20,000 \]
+Discount Amount = $100,000 x 0.20 = $20,000
 . Determine the effective valuation for the investor:
-   The effective valuation for the investor is calculated by subtracting the discount amount from the valuation cap:
+The effective valuation for the investor is calculated by subtracting the discount amount from the valuation cap:
-   \[ \text{Effective Valuation} = \text{Valuation Cap} - \text{Discount Amount} \]
+Effective Valuation = Valuation Cap - Discount Amount
-   \[ \text{Effective Valuation} = $5,000,000 - $20,000 = $4,980,000 \]
+Effective Valuation = $5,000,000 - $20,000 = $4,980,000
 . Calculate the investor's ownership percentage:
-   \[ \text{Investor Ownership Percentage} = \frac{\text{Investment Amount}}{\text{Effective Valuation}} \]
+Investor Ownership Percentage = Investment Amount / Effective Valuation
-   \[ \text{Investor Ownership Percentage} = \frac{$100,000}{$4,980,000} \]
+Investor Ownership Percentage = $100,000 / $4,980,000
-   \[ \text{Investor Ownership Percentage} \approx 0.02008 \]
+Investor Ownership Percentage approx 0.02008
 To express this as a percentage, multiply by 100:
-   \[ \text{Investor Ownership Percentage} \approx 2.008\% \]
+Investor Ownership Percentage approx 2.008%
 So, when the investor invests $100,000 in the startup with a valuation cap of $5 million and a 20% discount, they will receive approximately 2.008% ownership in the company.
+[[https://carta.com/blog/convertible-securities/|
+Convertible securities: SAFEs vs. convertible notes]]