Welcome to the Financial Times Lexicon

Browse thousands of words and phrases selected by Financial Times editors and suggest new terms for the glossary.

 

Term of the day

convertible note

Convertible notes are often used by angel investors who wish to fund businesses without establishing an explicit valuation of the company in which they are investing. 

When an investor purchases equity in a startup, the purchase price of the equity implies a company valuation. For example, if an investor purchases a 10 per cent ownership stake in a company, and pay $1m for that stake, this implies that the company is worth $10m.

Some early stage investors may wish to avoid placing a value on the...