A convertible note is a form of debt that converts to equity in a future investing round. Unlike a SAFE, it is a loan, so it carries interest.
What the video says
In venture capital, a loan to a startup can turn into shares. It's called a convertible note. Say an investor lends five hundred thousand. Like any loan, it charges interest. Say five percent a year. That's twenty-five thousand. But the plan is for it to become shares. At the next funding round, the note converts into equity. Unlike a SAFE, it's debt. If that round never comes, it's still a loan, and loans come due. So why do investors care? The investor starts as a lender, and hopes to end as an owner. A loan that wants to be a share.
In the glossary: Convertible note
A simple example with round numbers, not advice. Terms vary by fund.
See an error?