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what this is

This note is a convertible instrument that is intended to be used to document a seed investment from a third-party investor or a bridge financing from existing shareholders.

The terms of the note are substantially based on the simple agreement for future equity created by the US accelerator, Y-Combinator.

how it works

This agreement anticipates that the investment amount is drawn down in a lump sum on one date and is unsecured.  The amount of the investment is not a loan, has no set maturity or repayment date and does not accrue interest.  The investment amount remains outstanding until:

  • it is automatically converted to equity on the date of a qualifying equity financing
  • it is repaid or converted (at the election of the investor) on the occurrence of a liquidity event.

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We also have another popular variation of the convertible note – our KISS convertible note template.

The terms of the note are substantially based on the keep-it-simple-security created by 500 Startups.

using our templates

Use of a template by business users is free of charge and is subject to you agreeing to our template terms of use.