A short-term loan that converts to equity at the next priced round — comes with an interest rate, a maturity date, a valuation cap , and a discount. The original startup seed instrument, mostly replaced by SAFEs post-2013.
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Add my companyConvertible notes carry interest (typically 4-8% annually) and have a maturity date — usually 18-24 months. If the next round doesn't close in time, the notes are technically in default, putting founders in legal limbo. YC's 2013 SAFE removed both features entirely.
Source:YC — Why the SAFE