Convertible Debt

Convertible Debt

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A financing vehicle that allows startups to raise money while delaying valuation discussions until the company is more mature. Though technically this is debt the company promises to pay back to its lender(s), convertible notes are meant to convert to equity at a later date. Investors who agree to use convertible notes generally receive a discounted price when they purchase equity since they put in their money in at the earliest, riskiest stages of the business.

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