Convertible note template yc: Grab It, Use It, Don’t Screw It Up

Last updated 2025

TL;DR

Free download — YC publishes the plain-word template here.

What it is — Short-term debt that turns into equity at the next priced round or maturity.

Use it when investors insist on debt, interest, or a maturity date; skip it if a SAFE or priced round is faster.

Fill, sign, wire — Set cap/discount/interest/maturity, swap Word variables, collect e-signatures, close in days.

Watch the maturity cliff — unpaid notes can bankrupt a startup if the next round drags.

Need the convertible note template yc uses? It’s one click away in the YC documents hub. A convertible note is short-term debt that automatically converts to equity when you raise a priced round or hit the maturity date—useful when investors want interest, repayment upside, or a hard deadline that SAFEs don’t give. Download, swap the bracketed variables, and you can close weeks faster than a priced seed round.

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What is convertible note template yc?

YC’s template is a bare-bones, lawyer-scrubbed Word doc that creates a convertible promissory note with a valuation cap, discount, 6% interest, and a 2-year maturity—market standard for pre-seed rounds.

A convertible note template yc is a pre-drafted loan agreement that lets startups raise money now and repay investors with equity later, typically at a discount or capped price.

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Convertible note template yc — Download & Quick Start

Download: YC convertible note (Word).

Skim the YC library notes so you know why each clause exists.

Fill variables: company legal name, raise amount, cap, discount, interest, maturity date.

Email to counsel for a 15-min scan (optional but cheap insurance).

Send via DocuSign, collect wires, update your cap table—done.

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How to use it (step-by-step)

1. Set economic terms
   Valuation cap: e.g., $8 M pre-money.Discount: 20% is YC default; use 15–25%.Interest: 6% simple interest, accrues until conversion.Maturity: 18–24 months; longer if next round is hazy.
2. Fill in the blanks
   [Company Legal Name]
   ,
   [Amount]
   ,
   [Cap]
   ,
   [Discount]
   ,
   [Maturity Date]
   .Leave the conversion mechanics untouched—YC already wired in the most founder-friendly language.
3. Investor-specific tweaks
   Most angels sign as-is; some add pro-rata side letters—keep those separate so the base template stays clean.
4. Signature & wire
   Counter-sign last, only after funds hit the bank.Store executed PDF in your data room; log accrued interest monthly.
5. Conversion day
   When the priced round closes, calculate the better of cap or discount, issue shares, and kill the note.If maturity hits first, either repay cash (rare) or get holders to extend—start the conversation 90 days out.

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Practical Tips & Cautions

Cap-table hygiene — log every note in a single spreadsheet or Carta to avoid surprise dilution.

Interest accrual — even 6% compounds; model it so future investors see exact dilution.

Maturity buffer — negotiate at least a 6-month automatic-extension clause if you can.

Founders often miss this — uncapped notes with only a discount can give angels cheap equity if your next round is a down round; insist on a cap.

Keep side letters minimal — pro-rata rights are normal; most-favored-nation or board seats are not.

(Not legal advice—use counsel for term changes.)

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FAQs

Does YC still recommend convertible notes in 2025?

They offer the template but prefer SAFEs for new batches; use notes only if investors require debt treatment.

Can I edit the YC convertible note template?

Yes, but change only the variables in brackets; altering conversion mechanics can create securities-law landmines.

What happens if I hit maturity without a priced round?

Investors can demand cash repayment; in practice most extend, but you need their consent—get it in writing 60–90 days early.

Is a valuation cap or discount better for founders?

Cap protects you if valuations skyrocket; discount helps investors if valuations stay flat. Use both and let the investor take the better one—market standard.

Are convertible notes tax-deductible for startups?

Interest expense is deductible; principal is not—ask your CPA.

How many notes can I stack before a Series A?

There’s no hard limit, but >2–3 note classes with different caps complicate the A-round—keep terms identical or migrate to a single SAFE pre-A.

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Conclusion

Grab the convertible note template yc provides, drop in your cap/discount/interest numbers, and you can close a bridge round in days—just calendar the maturity date and model dilution early. Download it now, run it past counsel, and get back to building. Grounded in YC docs and verified legal sources.

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