Convertible notes
A loan today.Equity tomorrow?
Understand the debt terms as carefully as the conversion terms.
Talk about your startup
01 / THE PROBLEM
Capital arrives with terms that can outlast the round.
Convertible notes generally create debt that may convert into equity under defined conditions. Maturity, accrued interest, and events of default can matter even when everyone anticipates another financing.
+02 / COMMON FRICTION
Small gaps.Bigger questions.
01Earlier instruments not modeled together
02Unclear investor consent rights
03Incomplete diligence records
04Closing approvals left too late
03 / HOW ETHAN CAN HELP
Understand the business.
Then the documents.
Start with your objective and the documents already in place. Identify the decisions that need attention, discuss practical options, and coordinate the work needed to move forward.
Convertible notes generally create debt that may convert into equity under defined conditions. Maturity, accrued interest, and events of default can matter even when everyone anticipates another financing.
+04 / WHAT THE SERVICE MAY INCLUDE
The workbehind the next step.
- Principal and interest
- Maturity dates
- Valuation caps and discounts
- Conversion mechanics
- Repayment and amendment rights
The scope is agreed for each engagement. Some questions may require coordination with tax, employment, or other specialist advisers.
07 / WHEN YOU MAY NEED THIS
An investor sent a term sheet?↗Preparing your company for diligence?↗+FOUNDER FAQ
Good questions.Clearer next steps.
General information only.
Not legal or tax advice.
01What is a SAFE?
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A simple agreement for future equity provides contractual rights tied to future events. Common YC forms have no interest or maturity date. Conversion and payout rights depend on the actual agreement.
02What is a convertible note?
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A convertible note is generally debt with principal, interest, and a maturity date that may convert into equity when specified conditions are met.
03What is the difference between a SAFE and convertible note?
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The debt features are a key distinction. Both may have valuation caps or discounts, but their conversion, repayment, and other rights must be reviewed in the specific documents.
04What documents do investors review?
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Common requests include formation documents, board approvals, equity issuances, a cap table, IP assignments, material contracts, employment records, and earlier financing documents. The scope varies by transaction.
05What should founders prepare before fundraising?
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Organize formation documents, approvals, stock records, the cap table, IP assignments, material contracts, and outstanding financing instruments. Identify gaps before promising a closing date.
+READY FOR THE NEXT CONVERSATION
New capital.A new chapter.
Bring the company’s story, ownership, and records into the same conversation.
YOUR NEXT CHAPTER STARTS WITH A CONVERSATION.
Let’s talk about
what you’re building.
Tell Ethan where the company is today
and what needs to happen next.