After discussing how to price convertible notes, we realised that there is a simpler way to explain what they are.

Convertible notes are quite simple when understood. They basically are a debt that converts into equity when a certain event (trigger event) happens. They have however some common clauses that are key to determining the equity situation of all players. Here is a visual description:

Find precise calculations for different equity scenarios in our Convertible Notes Calculator

P.S. Are you struggling with your company valuation?