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MemberMarch 12, 2021 at 11:05 am0Level 1
Convertible Notes are currently in trend @Aryan , and I guess that’s why you want to know about it.
So, a convertible note is a short-term debt that converts into equity. In the context of seed financing, the debt automatically converts into shares of preferred stock upon closing a Series A round of funding.
In other words, investors loan money to a startup as its first round of funding. Rather than get their money back with interest, the investors receive shares of preferred stock as part of the startup’s initial preferred stock financing, based on the note’s terms. Also, this is one of the reasons why this is trending among startups.