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Dictionary by pitch.dog
Valuation & conversion mechanics · Working

Cap-and-discount

Also called: cap plus discount

ELI5

Conversion uses whichever of a cap or discount gives the investor the better price.

Used in conversation

“Model both cap-and-discount outcomes.”

Definition

A convertible structure using both a valuation cap and a conversion discount, with the more favourable calculation often applying.

Here “Cap-and-discount” means: A convertible structure using both a valuation cap and a conversion discount, with the more favourable calculation often applying.

Pitch context

You will see “Cap-and-discount” in fundraising decks, data rooms, term sheets and investor conversations when the discussion reaches valuation & conversion mechanics.

Why it matters: In valuation & conversion mechanics, a loose definition can change rights, obligations, approval, disclosure or enforceability.

Caution

Meaning, enforceability and required process vary by jurisdiction and agreement; this definition is not legal advice.

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Sources & evidence · 5

Direct term-level sources and supporting source families.