Convertible Note
A loan that converts into equity at a later priced round instead of being repaid in cash.
A convertible note is debt that is expected to become equity. It carries an interest rate, usually 2–8%, and a maturity date, and converts at the next qualifying round, typically with a discount or valuation cap.
Because it is debt, the maturity date matters. If no round happens before it, the note technically becomes repayable — a claim most early companies cannot meet. In practice notes are extended, but the leverage sits with the investor in that conversation.
SAFEs have displaced notes for most early rounds precisely because they remove that dynamic. Notes persist where investors want the protection of a debt claim, or in jurisdictions where SAFEs are less established.