What is a convertible note?

A convertible note is a loan that converts into equity at a future priced round instead of being repaid in cash. Like a SAFE it defers the valuation question, but unlike a SAFE it is debt: it accrues interest (typically 2–8%) and has a maturity date by which it must convert, be extended, or be repaid.

Notes usually carry a valuation cap and/or a conversion discount (commonly 10–25%) rewarding early risk. They remain common outside the US and in bridge financings between rounds, where the debt framing gives investors a modest legal preference if things go wrong.