What is a convertible note: is a type of short-term debt that startups use to raise early-stage funding from investors. Instead of being repaid in cash, the loan converts into equity in the company during a future financing round, usually when the startup raises a priced round from venture capital investors. This conversion typically happens at a discount or with a valuation cap, giving early investors a reward for taking higher risk. Programs at Angel School often teach aspiring investors how convertible notes simplify early-stage funding while delaying the need to set a company valuation.