Module 3 · Chapter 8

The Conversion

At the first priced round, a year of early money turns into shares in one step. This chapter prices both instruments, shows why one cap mattered and one did not, and closes the paperwork.

≈ 13 min read 8-question test

In this chapter

  • How each instrument's price was set, and why one cap mattered and one did not
  • What happened to the notes' interest and to the old claims
  • How to make the instruments, the minute and the register agree

8.1Conversion in one paragraph

Before its Series A, Solaris had taken €1,300,000 from early investors and issued no shares for it. Three angels had paid under advance subscriptions, and three lenders had lent on convertible notes. Conversion turns that money into a fixed number of shares of a fixed class.

At Series A Completion it produced 2,000 shares. Two documents, written months apart by different lawyers, had to give one number that the register could carry. That is why conversion is the step of a round that most often goes wrong.

Key point

Early money is priced by the first proper round, on terms fixed before that round existed. The instruments decide the number, and only the register makes it true.

Also in this chapter

  1. Why conversion is automatic and comes first
  2. Two prices, and the lower wins
  3. The cap that set the price and the cap that did nothing
  4. How much the Cap Base decided
  5. What happened to the interest
  6. One class, two prices
  7. Releases: why nobody can ask for the money twice
  8. Four documents, one number
  9. Meridian on both sides of the table
  10. Your job

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