Okuzeka
Entrepreneurship & Startups vocabulary · Fundraising & Investors

Convertible note

Meaning in entrepreneurship & startups, with examples

/kənˈvɜːrtəbl noʊt/nounAdvanced term

In entrepreneurship & startups, convertible note means: A short-term loan from investors that turns into company shares at a later funding round, usually at a discount, instead of being paid back in cash.

In Turkish: paya dönüştürülebilir borç senedi, dönüştürülebilir borç, convertible note

How it is used

Used in early rounds when founders and investors want to delay agreeing on a valuation. Key terms are the discount, the valuation cap, the interest rate and the maturity date. Unlike a SAFE, a convertible note is debt, so it has interest and a repayment date.

Example sentences

  1. We raised 500,000 on a convertible note with a 20 percent discount and an 8 million cap.

  2. The convertible note turned into shares when we closed the Series A.

Common collocations

  • issue a convertible note
  • valuation cap
  • conversion discount
  • maturity date
  • convert into equity
  • SAFESimple agreement for future equity: a contract in which an investor gives money now and receives shares later, usually at the next priced funding round.
  • seed roundOne of the first official funding rounds of a startup, used to build the product, hire the first team and look for product-market fit.
  • angel investorA wealthy individual who invests their own money in very young startups, usually in exchange for equity, and often gives advice and contacts as well.
  • valuationThe estimated value of a company, agreed between founders and investors in a funding round, which decides how much ownership investors get for their money.
  • pre-money valuationThe value of a company just before new investment money comes in. It is used to work out the price per share in a funding round.

More terms: Fundraising & Investors

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