Maturity Date

Quick Definition

The deadline by which a convertible note must be repaid or converted to equity.

What is Maturity Date?

Maturity date is when a convertible note comes due. If the note hasn't converted by then, the company technically owes the principal plus accrued interest as debt.

What Happens at Maturity?

Options include: automatic conversion at cap valuation, note extension, repayment (rare for startups), or negotiated resolution. Most investor-friendly notes convert rather than demanding repayment.

Maturity Risk

Hitting maturity without raising can create leverage for note holders. Some may demand unfavorable conversion terms. Set maturity 18-24 months out to allow time for your next round.

Formula

Typical maturity structures:

• Term: 18-24 months
• Extension: Often 6-12 months automatic or by mutual agreement
• Auto-convert: At cap if qualified financing doesn't occur

Example

Note terms: $400K, 18-month maturity, $6M cap.

• Scenario 1: Raise Series A at month 12.
  Note converts at Series A terms with discount/cap.
• Scenario 2: No raise by month 18.
  Note converts at $6M cap valuation (forced conversion).
  Founder avoids debt repayment but at predetermined terms.

Related Terms

Most Favored Nation (MFN)

A provision guaranteeing an investor will receive terms at least as favorable as any subsequent investor receives.

Qualified Financing

The minimum raise amount that triggers automatic conversion of convertible notes or SAFEs.

Accrued Interest

Interest that accumulates on convertible notes over time, typically converting to additional equity.

Learn More About Maturity Date

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