Convertible note = debt that converts to equity at the next priced round. Investor gets shares for (principal + accrued interest) at the better of valuation cap or discount.
Conversion amount (principal + interest)
$0
Accrued interest
$0
Conversion price
$0
Shares issued
0
Investor ownership
0%
Method that wins
—
Effective valuation
$0
Notes vs SAFEs
Convertible notes are debt: they accrue interest and have a maturity date. Risk of default exists if no qualified financing happens before maturity.
SAFEs are not debt: no interest, no maturity. Simpler but newer instrument (YC introduced them in 2013).
Most Indian early-stage rounds still use convertible notes (SEBI/FEMA recognise them); SAFEs are becoming common too.
If both terms apply, the investor picks whichever gives them more shares.