Conversion Price
The conversion price is the price at which the convertible note can be converted into equity. It is usually set at a discount to the price at which the company issues equity in a subsequent financing round. A typical discount offering ranges from 10% to 30% of the company valuation at time of conversation.
For Example:
the company valuation is $1M and the note discount is 20% the investor will convert at $800K valuation, which mean that they will get more shares for the risk they take.
Conversion Ratio
The conversion ratio is the number of shares of equity that the convertible note can be converted into. It is calculated by dividing the principal amount of the note by the conversion price.
