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Pat's Tinsels plans to make Christmas decorations with a Texan flair. Pat's wants to raise $300,000 to get started, but feels that the company is too new to put a valuation on. Pat's decides to issue convertible debt, with an interest rate of 5% and a 20% bonus. The debt will convert to equity with the first priced round, expected to be in two years. Pat's hopes to be valued at $6,000,000 (pre-money) at the time of the priced round and expects to be raising $1.5 million on that round of financing. Assuming that all goes as expected, how much will the convertible debt be worth when it converts after two years? (include interest plus the bonus) [ Select ] what percentage of ownership of the company will the convertible debt investors receive? Use the post-money valuation (pre-money plus new investment) to determine your answer. [ Select ] Suppose that the investors want a valuation cap to be a part of the deal. If the deal ends up with a valuation cap of $4,000,000, and the actual valuation of the company at the time of the priced round is $6,000,000, how will that change your answer? [ Select ] Pat's lawyer suggests that she might want to use SAFE notes rather than convertible debt. If she does so, what feature of the convertible debt listed above will not be a feature of the SAFE notes? [Select ] Pat's Tinsels plans to make Christmas decorations with a Texan flair. Pat's wants to raise $300,000 to get started, but feels that the company is too new to put a valuation on. Pat's decides to issue convertible debt, with an interest rate of 5% and a 20% bonus. The debt will convert to equity with the first priced round, expected to be in two years. Pat's hopes to be valued at $6,000,000 (pre-money) at the time of the priced round and expects to be raising $1.5 million on that round of financing. Assuming that all goes as expected, how much will the convertible debt be worth when it converts after two years? (include interest plus the bonus) [ Select ] what percentage of ownership of the company will the convertible debt investors receive? Use the post-money valuation (pre-money plus new investment) to determine your answer. [ Select ] Suppose that the investors want a valuation cap to be a part of the deal. If the deal ends up with a valuation cap of $4,000,000, and the actual valuation of the company at the time of the priced round is $6,000,000, how will that change your answer? [ Select ] Pat's lawyer suggests that she might want to use SAFE notes rather than convertible debt. If she does so, what feature of the convertible debt listed above will not be a feature of the SAFE notes? [Select ]

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