Convertible Note
Definition
Convertible Note: A convertible note is a form of short-term debt that converts into equity during a future financing round. It includes interest, a maturity date, and typically a valuation cap and/or discount. Convertible notes were the standard early-stage instrument before SAFEs.
Example Usage
“Our convertible note had a 20% discount and $8M cap, converting when we raised our Series A.”
Common Misconceptions
Related Terms
SAFE
A SAFE (Simple Agreement for Future Equity) is an investment contract that gives investors the right to receive equity in a future priced round. Creat...
Valuation
Valuation is the estimated worth of a company at a given point in time. Pre-money valuation is the company's value before receiving new investment, wh...
Seed Round
A seed round is typically the first official equity funding stage for a startup, used to develop the product, hire initial team members, and validate...
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