What is convertible debt?
Convertible debt (or convertible note) is a debt instrument that includes the right or obligation to convert the principal — and often accrued interest — into equity at a future event, typically the next priced equity round. Convertible debt is the predecessor and now-alternative to SAFEs as a seed-stage fundraising instrument.
Key economic terms include the principal amount, interest rate, maturity date, conversion trigger (qualified financing, acquisition, IPO), conversion price (often valuation cap and/or discount), and what happens at maturity if conversion has not occurred (extension, repayment, or forced conversion).