Early Stage Investing Guide: Convertible Instruments
This article aims to provide a brief overview and explanation of the key documents involved in a fundraising scenario where investors are acquiring convertible debt instruments in exchange for investment capital. In contrast to stock transactions, convertible instrument investments do not introduce new stockholders to the issuers cap-table until the instrument subsequently converts into equity as a result of one or more triggering circumstances. While there are other flavors of convertible instruments (SAFEs for example), this article will focus on convertible debt / notes.