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The $100k is a $3m cap with a 20% discount [0]

Assuming the companies seed round prices above $3m, it's an additional 4% dilution to the company (bringing total initial dilution to about 9%)

[0] http://www.readwriteweb.com/archives/techstars_nearly_matche...

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Seems to introduce some signaling issues...

The stronger the company, the less likely they are to accept the note at a 3mm cap.

Agreed - seems like the terms could potentially defer the top-quality companies (although most would be happy to have the $ in their pockets), while the start-fund structure makes it attractive to any stage.

I'd hope the money is elective though, as that would certainly solve the problem.

Wow. $3mm cap with 20% discount is horrible; I don't know of anyone currently raising money on those terms. There has to be some mistake somewhere.

It's an "or," not an "and," I think. 3mm cap OR 20% discount, whichever is lower, but not both.

These are average standard terms for a first raise, pre-seed. This just allows companies to focus more on building instead of raising.

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