-This is a bad deal. The discount is sort of bad; it's somewhat unfriendly as it's on the high side, but it's not unheard of. The cap is pretty bad, though, and you combine both of those and you have fairly unfriendly terms.

-Convertible debt notes already come with a (low) interest rate.

-It's pretty clear the reason you are getting such bad terms is because you have no leverage in the negotiation. You've made it clear that your company desperately needs the money; the investor probably knows you're desperate and that's why you get such bad terms. There is a lot of truth to the saying that it's best to raise money when you don't need it: because then you can afford to walk away from the deal or spend more time finding other offers. Firstly, try to negotiate better terms. When someone presents a term sheet to you, it's meant to be the beginning of a longer discussion. Ask for a $4MM cap at 25% discount, and work your way down from there if you are refused. While that's happening you need to explore other options: 1) Find a better offer (get competing offers), 2) Position your company in such a way that you can afford to go without funding (firing people, cutting expensive programs), 3) If you're desperate you'll have to bite the bullet and take the deal.

-Keep in mind that if you don't get better offers and can't negotiate a better offer, and if there is absolutely no way your company can survive without funding, then obviously you need the funding.

-I'm not able to refer you to a lawyer, but keep in mind that you should involve a lawyer in the negotiation. Your friend probably knows more.

Other points:

-Why the hell do you have 8 full-time employees? How are you paying them? How can you justify that expense? What kind of business are you running that has such a high burn rate?

-Can you raise money from non-traditional sources such as family & friends?

-Are you actually truly pre-revenue (as in negligible revenue)? If so, that again begs the question as to why you even have 8 employees and expensive marketing referral programs. Those are not things you do without already having lots of funding.

-Since you're "pre-revenue," why do you even think you've found product-market fit? Is it your daily active users number or monthly actives?

-I wouldn't consider a $250k exit a "proven track record of building and exiting companies." Though it is a positive for investors, I don't think investors would consider it a proven track record.