What is a Convertible Note?

Detailed Deep Dive

A Convertible Note is a debt instrument that converts into equity at a future date, typically in connection with a future priced equity round. Unlike SAFE notes, convertible notes are structured as loans, meaning they carry an interest rate (usually 4% to 8%) and a maturity date (usually 18 to 24 months). If the startup does not raise a priced round before the maturity date, the note may become repayable or convert to equity under predefined terms. They typically include valuation caps and discount rates to incentivize early investors.