Convertible Note
Definition
A short-term debt instrument that converts into equity at a future financing round, typically at a discount to the next round's valuation. Convertible notes are commonly used in seed-stage financing because they defer the need to establish a valuation.
Related Terms
Related FAQ
What is a SAFE and how does it work?
A SAFE (Simple Agreement for Future Equity) is a short, investor-friendly contract where an investor gives money now in exchange for equity at a future financing event — it is not debt and has no interest or maturity date.
Read full answer →What is bridge financing and when do companies use it?
Bridge financing is short-term debt or convertible instruments used to fund operations between major equity rounds, typically converting to equity at the next round's valuation.
Read full answer →What is the difference between a SAFE and a convertible note?
SAFEs are simpler, cheaper, and have no maturity date or interest — they convert only at a future financing event. Convertible notes are debt with interest and a maturity date, creating pressure to convert or repay.
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