Convertible Note

Short-term debt that converts into equity at a future priced round, with interest and a maturity date. Plain-language explainer with examples. Free to read.

Convertible Note

Short-term debt that converts into equity at a future priced round, with interest and a maturity date.

What Convertible Note means

A convertible note is a loan that converts into preferred shares at the next priced round. Unlike a SAFE, it carries interest (usually 4–8%) and has a maturity date (usually 18–24 months) at which the note must convert, be repaid, or be extended.

Notes were standard before SAFEs. They still see use for bridge financings and in jurisdictions where SAFEs aren't well-established. The main downside for founders is the maturity date — if you can't raise a priced round in time, you're in default.

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