A provision in a SAFE or Convertible Note that allows early investors to convert their investment into equity at a reduced price (typically 20%) compared to the next funding round.
Why it matters: It's an alternative to a Valuation Cap to reward early investors. If a note has both a cap and a discount, the investor converts at whichever gives them the lower price per share.
In practice: A SAFE has a 20% discount. The Series A investors pay $1.00 per share. The SAFE investor converts their money into shares at $0.80 per share.