Jul 15, 2023 · A Convertible Note is a form of short-term financing wherein the loan converts into equity rather than being repaid in cash. Startups rarely qualify for traditional debt financing from banks and …

A simple guide to understanding what a convertible note is, how convertible debt works, and an example of a convertible note

You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2.

For example, an angel investor invests $300,000 in a startup as a convertible note. The terms of the note are a 20% discount and automatic conversion after a qualified funding round of $1 million.

Jun 6, 2024 · A convertible note is a short-term financial document that allows a business to receive cash in exchange for equity in a company. This agreement is utilized by startups to receive support …

Nov 15, 2023 · Imagine a convertible note is issued at seed stage carrying a 20% discount on the company's shares at the next round. If at the next round the company's shares are worth €5, the …

5 days ago · Learn how convertible loan notes work, key terms like valuation caps and discounts, and when conversion happens. Complete founder's guide.

Apr 1, 2025 · Example: If a convertible note has a $5 million valuation cap and the company later raises money at a $10 million valuation, the noteholder's investment converts as if the company were …

Here’s the step-by-step process to set up the cap table: This is based on the pre-money valuation divided by the Pre-Money Share Count (the shares that existed before the Series A): It’s $7.50 here, …

Feb 8, 2024 · In this article, we'll break down exactly what a convertible note is, how they work, and the pros and cons of using them. We'll look at real-world examples of convertible note terms and structures.