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Glossary Convertible Note

A convertible note is a form of debt that can be converted into equity upon certain conditions and/or if the noteholder elects to convert. This mechanism is commonly used for early stage investing in startups and for later stage bridge financings. Typically, startups will include a conversion discount and/or valuation cap, the purpose of which is to provide the investor a discount when the convertible note converts into equity upon a subsequent qualified financing.