The Negotiation
Room.
The attachment is negotiable. The arithmetic keeps a record. A founder’s counteroffer, an investor’s alternative, and a few reasons neither side considers the other’s request a small one.
The $500,000 attachment.
NOT FOR SIGNATURE
Post Money Capital has offered Ordinary Machines $500,000. Both are fictional. Change the proposed terms, put the company through a financing, a delay, or a sale, and see which person has a reason to object.
$500,000Principal received by the company
Conversion cap: $5 million. Discount: 20%. Interest: 8% simple annually.
Maturity: 24 months. Sale cash election: 2× original principal, plus accrued interest. Cap and discount remain alternative prices.
Who gets the next slice?
A qualifying $2 million cash round converts the note. Change the terms and compare the shares issued. The $500,000 principal stays fixed.
Cap price $1.00 beats discount price $1.60. $540,000 converts into 540,000 shares.
Original offer. Both rows use the same outcome and elapsed time.
Definitions and what this model leaves out
Four million founder shares plus one million reserved pool shares, no other convertibles or promised awards. New-money price is pre-money valuation divided by the existing fully diluted shares, including any selected pool top-up but excluding the note. The cap denominator can include or exclude that top-up. Cap and discount are alternatives; accrued simple interest converts. The note is assumed still outstanding, even if the selected time is past maturity; no prior repayment request or conversion election is modeled. No subsequent rounds or exit preferences are modeled here.
Share counts retain decimals for comparison; real issuance needs the specimen’s fractional-share settlement and a closing schedule. Other terms and fixed assumptions do not change when a slider moves.
The other side has opened your email.
The lower of two conversion prices protects our entry in different funding outcomes. We have postponed your valuation, not our preferences.
We deferred the valuation. We have not deferred our view on it.
Why is that sentence there?
You want enough capital without giving away more ownership than the business needs to. A higher cap helps when cap pricing governs; a smaller discount helps when discount pricing governs. Check both outcomes instead of negotiating a number that never binds.
Cooley note §2.1; specimen clauses 2–3.
Read the accompanying installment ↗Educational model, not legal, tax, or investment advice. Changes are hypothetical proposals, not amendments to the reading copy. Dialogue is scripted fiction, not an acceptance prediction. These are selected deal terms, not a survey of market standards. Controls stay in this browser tab; this tool makes no model requests and saves no deal terms. Optional site analytics remains subject to your existing privacy choice, and this exercise is masked.
Sources and model boundaries
The mechanics refer to Cooley’s public-domain Series Seed note. The selected $500,000 terms, harsher departures, proposed changes, and fictional dialogue are ours. No source endorses this offer or these negotiations. This is a note, not a SAFE.
- Cooley LLP — Series Seed convertible promissory note. Public-domain CC0 form in Cooley's repository, reviewed October 1, 2026. Its alternatives inform the mechanics examined here. Our fictional note is an original educational example with deliberately selected terms, not a Cooley-endorsed form.
- Cooley Go — Convertible Debt. A short primer on debt that may convert to equity. Transaction-specific advice and documentation still require counsel.
- Cooley Go — Understanding the Valuation Cap. Context for capitalization definitions and the liquidation-preference issue. Our numbers use the explicit convention printed in the fictional note.
- Y Combinator — Safe Financing Documents. Primary reference for the distinct SAFE instrument. Do not import a SAFE's mechanics into this interest-bearing, maturity-bearing note.
Arithmetic uses the same tested assumptions as the reading series. Conversion pricing, debt at maturity, and an unconverted note’s cash sale election are separate scenarios. Open the definition panel for the selected outcome before applying its numbers elsewhere.
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