Definition
A convertible note is debt that is meant to become shares — usually at the next priced round, with a discount and often a valuation cap. Unlike a SAFE, it has a maturity date and can accrue interest. If no round happens, the note can come due.
In the room
How the word shows up in a real conversation.
An angel lends ₹25 lakh on an 18-month note, 6% interest, 20% discount, ₹6 crore cap. At Series A the note converts on the better of the cap or the discount. If there is no round, the company and the angel must renegotiate or repay.
Common mistake
Ignoring the maturity date. A note that comes due with no round is a cash-flow event, not a paperwork footnote.
India note
Convertible notes in India sit inside company-law and FEMA rules. Get counsel before you copy a Silicon Valley template.
See also
SAFE
A YC-style agreement to invest now and receive equity later, usually at a priced round.
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Term sheet
A non-binding outline of the deal: price, ownership, and the rights that matter.
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Pre-money valuation
Company's valuation before receiving investment funding, used to determine the price per share for investors.
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Seed Capital
Initial funding provided to start a new business venture.
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