A convertible note is debt that converts into company equity when the next financing round occurs. Unlike a conventional loan, it is not repaid with interest. section 6.1
For startups, convertible notes offer one form of angel financing before a Series A. The alternative is a priced round, where investment is exchanged for stock at a negotiated company valuation. section 6.1
A realistic angel round
Fifteen angels investing $25,000 each provide $375,000. Raising similar amounts from three angel groups produces more than $1 million—enough to start a company before pursuing a larger Series A. That angel financing may use a priced round or convertible notes. section 6.1
