Convertible note
Debt that converts into equity at a future priced round.
Why it matters
Unlike a SAFE it carries interest and a maturity date, which means it is technically repayable if no round happens. That maturity date can become a genuine problem in a slow market.
A worked example
A $500K note at 6% interest maturing in 24 months converts to roughly $560K of equity value at the next round, or falls due if no round occurs.
What is typical
Largely displaced by SAFEs at early stage in the US, though still common in other markets and in bridge financings.
Related terms
SAFE
Simple Agreement for Future Equity. An investor gives you money now in exchange for shares later, when a priced round happens.
Read more →Valuation cap
The maximum valuation at which a SAFE or convertible note converts into equity.
Read more →Bridge round
Interim financing between priced rounds, usually intended to reach a milestone that unlocks the next round.
Read more →Run your raise on this
VCTerminal models these terms on your real cap table, so you can see what a term sheet pays you before you sign it.
Start free