[simonebrunozzi]

Incorrect. A cap means that above the cap, no discount matters. Below the cap, however, the discount is applied.

Example: raising 1M at 10M cap, 20% discount.

Scenario 1: next priced round at number below 10M - the cap doesn't apply, the discount does.

Scenario 2: next priced round at number between 10M and 12M - the cap doesn't apply, the discount does.

Scenario 3: next priced round at more than 12M - cap applies, discount doesn't.

In short, either cap OR discount are applied, whatever is the most beneficial to the investor.

[jasonkwon]

I think Daniel was working off of a different understanding of 'discount.' I think he meant a discount off of the price of the next round (Series A). If the Series A is $30M pre but you set a valuation cap on the safe of $20M post, you are getting a 'discount' on the conversion of the safe in the Series A (because it is lower than $30M pre).

You're right though that there's a flavor of safes that contain both a discount and a valuation cap, and the investor gets the benefit of whichever approach results in more shares, and your explanation is good.