Convertible Loan / Convertible Note / SAFE

Convertible loans are short-term debt instruments that convert into equity in a later financing round. Discounts or valuation caps are frequently applied. In the DACH environment they are an established instrument for bridge financings and early pre-seed financings.

The US counterpart, the SAFE (‘simple agreement for future equity’), dispenses with the debt character and functions as a pure equity conversion undertaking. In both cases, the central terms are the cap, the discount, the MFN clause and the conversion trigger.