Investing Basics: Convertible Notes

A convertible note (also referred to as convertible debt) is a debt loan that converts to equity when a company reaches a certain milestone, usually the next round of equity financing. It is a common way for early-stage startups to fundraise.

Convertible notes are commonly used as it is less expensive for a company to fundraise using this method as legal costs for document creation are lower which is useful for smaller rounds of funding at earlier stages (before Series A).

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