A convertible note is an investment vehicle often used by seed investors investing in startups when the company wants to delay establishing a valuation for that startup until a later round of funding or milestone. Convertible notes are structured as loans with the intention of converting to equity at some point in the future. However, there is no guarantee that this will come to pass. Convertible notes are intended to be short term debt that will convert into equity, usually in the form of preferred stock, when the entity closed a Series 1 Round of financing.
Related Terms: SAFE, Promissory Note, Secured Debt
