Convertible note

A loan that converts into equity at a future priced round, usually with a discount and a valuation cap. Unlike a SAFE it carries interest and a maturity date.

Example

$200,000 at 5% interest, a 20% discount and a $6M cap, maturing in 24 months.

Important

The maturity date is real. If no round happens before it, the note is technically repayable — which a startup usually cannot do.

Related terms