Automatic Conversion refers to a term found in convertible promissory notes (same as convertible debt) whereby the note will automatically convert into equity upon the occurrence of certain events, i.e. a next round financing or maturity. Note that automatic conversion into the next qualified financing round is standard; automatic conversion at maturity is generally negotiated (but usually preferred from the company’s standpoint).
Our convertible notes call for the principal plus interest to automatically convert into the next round whereby the company raises at least $1M.
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