Convertible notes

Key takeaways

• Notes add interest and maturity—plan for extensions if needed
• Economics (cap/discount) resemble SAFEs at conversion
• Notes can add admin overhead compared to SAFEs

Basics

Notes are debt: they carry interest and maturity, and convert later to equity.

• Common at seed; clarity on maturity extensions is helpful.
• Cap and discount behave similarly to SAFEs at conversion.
• Administrative overhead vs SAFE may be higher.

Notes vs SAFEs

• Notes: interest + maturity; may motivate faster priced round.
• SAFEs: simpler, no interest/maturity; faster admin at pre-seed.

Related