Convertible notes are a flexible and widely used financing tool for early-stage startups, functioning as short-term debt that converts into equity upon specific events such as future funding rounds or acquisitions.
They offer startups quick access to capital with lower legal costs, deferred valuation discussions, and preserved founder control, making them ideal for companies with uncertain early-stage valuations.
For investors, they provide potential upside through discounted share prices, valuation caps, and interest accrual. However, if not properly managed, risks can include repayment obligations if conversion doesn’t occur, a potential dilution for founders, lack of immediate equity or control for investors, and complex cap tables. You can read the full article, written by our Founder and CEO, Cian Robinson here.
