Convertible Notes
Convertible Note Primer
- What is a convertible note?
- Why do startups raise investment capital using convertible notes?
- What are the key parameters in a convertible note?
- What is a discount in a convertible note?
- What is a cap in a convertible note?
- What if the convertible note has both a discount and a cap?
- What does the maturity date indicate on a convertible note?
- What does the interest rate indicate on a convertible note?
- What happens to a convertible note if a company shuts down and goes out of business?
- Do convertible note holders get pro rata rights?
- Does a convertible note holder have a choice about converting a note in an equity financing round?
- What happens to a convertible note if a company is acquired or merges with another company?
- What does a “Most Favored Nation” clause in a convertible note do?
Numerical Examples
- Numerical Example: $25k convertible note with $5M cap, no discount
- Numerical Example: $25k convertible note with $5M cap, 20% discount
- Numerical Example: $25k convertible note with no cap, 20% discount
- What is warrant coverage in a convertible note?
- Numerical example: $25k convertible note with 10% warrant coverage
