A form of short-term debt that converts into equity, typically in conjunction with a future financing round. Unlike a SAFE, it carries an interest rate and a maturity date.
Why it matters: Prior to SAFEs, notes were the standard. They are still used when investors want the downside protection of debt (interest and repayment obligations) while waiting for an equity conversion.
In practice: A startup raises a $1M convertible note with 5% interest. If it converts in a year, the investor gets equity worth $1.05M.