Convertible Debt

Convertible debt is an investment structure frequently issued by startups when raising seed capital from angel investors. With convertible debt, the startup issues the angel investor a promissory note, for the angel’s investment amount, that contains a conversion feature. The conversion feature is the mechanism by which the debt (the promissory note) will convert to equity (new shares for the investor) upon a future event, such as an Automatic Conversion.


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