A debt-based early-stage financing instrument that converts to equity in a future round — for informational use; have a startup attorney review before using it to actually raise money.
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A convertible note is a real debt instrument with interest, a maturity date, and significant legal/tax consequences. This template is a simplified starting point — have a startup attorney prepare or review the final version before using it to actually raise money.
This Convertible Note ("Note") is entered into as of [Effective Date] between [Company Name] ("Company") and [Investor Name] ("Investor"), for a principal amount of [Amount].
The Note accrues interest at [Rate]% per year and matures on [Maturity Date], at which point it becomes due unless converted before then.
The Note converts into equity upon a qualified equity financing of at least [Threshold Amount], at a price based on [Valuation Cap of [Amount] and/or Discount Rate of [Percentage]%, whichever is more favorable to Investor].
If a change of control occurs, or the Note reaches maturity without a qualifying financing, Investor is entitled to [repayment of principal plus accrued interest, or conversion at the Valuation Cap, at Investor’s election, or as otherwise negotiated].
Company represents it is duly organized and has the authority to enter into this Note. Investor represents they are acquiring this Note for investment purposes and, where required, that they qualify as an accredited investor under applicable securities law.
This Note is governed by the laws of the State of [State / Jurisdiction], including any applicable usury limits on the interest rate.
Company Representative Signature: _______________________ Date: _______________
Investor Signature: _______________________ Date: _______________