Convertible Note

A convertible note is a type of short-term loan used by startups to raise money. It allows investors to lend money to the startup, which is later converted into equity (ownership) in the company, typically during a future financing round. Instead of getting paid back with interest, the investors receive shares in the company as it grows. This approach benefits both the startup, which can delay valuation discussions, and the investors, who gain potential equity at an early stage, often at a discounted rate compared to future investors.