Lawyer for Convertible Note

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 4,009 reviews

Jump to Section

Need help with a Convertible Note?

Post Project Now

If you’ve decided to invest in a start-up company, you may need a lawyer's expertise for a convertible note. This investment is an exciting but somewhat complex process involving a formal agreement between a seed investor and issuing company with several vetting levels and legal forms. One form investors will encounter when investing in a start-up is the convertible note.

A convertible note is a type of short-term debt often used by companies not ready for valuation yet. These notes are then repaid by converting them into equity later, typically when the start-up secures future financing. In this article, we will discuss the role of a lawyer in convertible note investments.

What is a Convertible Note Lawyer?

If a start-up company receives an investment from a venture capitalist but still needs more capital to achieve its goals, it may need to issue additional securities. A convertible note is one of the most common types of such securities. These notes are considered a debt, or loan, to be repaid later.

A lawyer for a convertible note helps the start-up company and the investor to negotiate the terms and conditions of the investment and prepare the convertible note agreement. Typically, this type of investment has terms associated with it, usually outlined in an investor rights agreement, that can be negotiated by both the investor and the start-up company.

Senior Convertible Notes, a Simple Agreement for Future Equity (SAFE), a Keep It Simple Security (KISS), and a Simple Agreement for Future Tokens (SAFT) are other forms of convertible notes.

A convertible note, also referred to as convertible debt, typically has three parts:

  1. A description of the investment being made
  2. The amount being invested and when it will be paid back to the start-up company
  3. The conversion price or discount at which the investor can force conversion into equity in future rounds

The document also provides for certain events that would allow both parties to terminate the agreement with minimal penalties (e.g., bankruptcy).

A convertible note lawyer may also help negotiate the terms of converting the investment into equity. Converting a convertible note into equity requires two steps:

  • Step One: There must be another round of financing where equity can be sold at a higher valuation than in previous rounds
  • Step Two: If necessary, an amendment must be made to increase the number of shares available for issuance as well as their face value

Some convertible notes have provisions that allow them to convert automatically if certain conditions are met without requiring any action by either party; this provision is increasingly common in more sophisticated transactions.

Here is an article where you can read more about convertible notes.

What Do Convertible Notes Do?

Convertible notes are a financing mechanism that allows an issuing company to convert its debt into equity. They are generally issued in series and have an expiration date on which the full amount of the note must be repaid.

The borrower is then given a predetermined period of time to raise an equity round (or “follow-on”) so that they can pay back the entire loan, as opposed to just the remaining principal.

The benefits of convertible notes to seed investors include:

  • Discounts on future rounds. Because this financing reduces risk, an issuing company may offer smaller discounts on future rounds.
  • Better valuation control. Since issuing companies don't have to negotiate with existing shareholders for discount terms, they can have more bargaining power.
  • Faster time-to-exit. In case things go wrong, issuing companies can get out quickly without waiting for exit events like IPOs or acquisitions.

How Much Does a Lawyer for a Convertible Note Cost?

A lawyer for a convertible note will cost between $250-$1,000 per hour. Their total fee typically includes an hourly fee and any applicable retainer fee. The hourly fee is typically 1/3 to 1/2 of the total fees that you pay your lawyer.

The retainer fee is charged upfront and covers the costs involved with drafting and negotiating your convertible note agreement. It also determines how much your lawyer can spend working on your documents.

These are the usual fees associated with hiring a lawyer, however, it is common for convertible note lawyers to work on a contingency basis. This means that they only get paid when the start-up company raises money.

Here is an article that covers more examples of convertible notes and explains how they work.

Meet some lawyers on our platform

Wendy C.

2 projects on CC
View Profile

Briana C.

60 projects on CC
View Profile

Matthew S.

2 projects on CC
View Profile

Todd H.

2 projects on CC
View Profile

Key Terms in a Convertible Note

Convertible notes are a popular funding round for start-ups. If you're raising money with a convertible note, here are terms to consider adding before you sign:

  1. Notice of Conversions. A notice of conversion is a formal document that an investor submits to the company when they want to convert their investment into equity.
  2. Conversion Price. The conversion price is the price per share the investor will receive when they convert their investment into equity.
  3. Conversion Discount. The conversion discount is the percentage discount the investor will receive on the equity price when they convert their investment. For example, if the conversion price is $0.50 per share and the equity price is $1.00 per share, the seed investor will receive a 50% discount on the equity price.
  4. Cap. The cap is the maximum price per share the investor will pay when converting their investment into equity. For example, if the cap is $1.00 per share and the equity price is $2.00 per share, the seed investor will only pay $1.00 per share when they convert their investment.
  5. Interest Rate. The interest rate is the percentage of the principal investment that the investor will accrue as interest.
  6. Maturity Date. The maturity date is the date on which the investment will mature, and the investor will be able to convert their investment.
  7. Warrants. A warrant is a type of security that gives the holder the right to purchase shares of the company's stock at a set price. Warrants are often included in convertible notes to sweeten the deal for the seed investor.

Here is an article about the terms in convertible notes.

Do I Need a Lawyer for a Convertible Note?

The short answer is most likely. Convertible notes are a popular financing mechanism that allows start-ups to raise capital without giving up an equity stake. However, while a convertible note can be a great investment option for many issuing companies, conversion can be tricky, and several factors determine the outcome.

This is because many potential pitfalls associated with convertible notes can be detrimental to the investor. Some of the potential risks include the following:

  1. The convertible note may be structured in a way that could be more favorable to the investor.
  2. The start-up may need help to raise additional funding, meaning that the investor may be stuck with a debt that cannot be converted into equity.
  3. The terms of the convertible note may be changed at the discretion of the start-up, which can be detrimental to the investor.

Overall, convertible notes can be a great investment for many start-ups, but it is important to know the potential risks before becoming a seed investor. Again, an experienced lawyer can help you navigate the complex legal landscape and protect your interests.

Here is an article about different forms of convertible debts.

Post a project in ContractsCounsel’s marketplace to receive flat fee bids from lawyers for your project. All lawyers have been vetted by our team and peer-reviewed by our customers for you to explore before hiring.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Lawyers

Charlton M. on ContractsCounsel
View Charlton
5.0 (6)
Member Since:
September 19, 2022

Charlton M.

Free Consultation
Get Free Proposal
Dallas, TX
9 Yrs Experience
Licensed in TX
University of St. Thomas School of Law

Charlton Messer helps businesses and their owners with general counsel and contract drafting services. He has helped over 500 businesses with their legal needs across a variety of industries in nearly a decade of practice.

Justin K. on ContractsCounsel
View Justin
5.0 (3)
Member Since:
September 22, 2022

Justin K.

Freelance Attorney
Free Consultation
Get Free Proposal
Valencia, CA
20 Yrs Experience
Licensed in CA
University of Southern California School of Law

I have been practicing law exclusively in the areas of business and real estate transactions since joining the profession in 2003. I began my career in the Corporate/Finance department of Sidley's Los Angeles office. I am presently a solo practitioner/freelancer, and service both business- and attorney-clients in those roles.

Max L. on ContractsCounsel
View Max
Member Since:
September 19, 2022

Max L.

Free Consultation
Get Free Proposal
Fort Lauderdale, Florida
17 Yrs Experience
Licensed in FL
The Benjamin N. Cardozo School of Law

Hi there. My practice focuses on several aspects of business law, including business entity formation and organizational documents, trademark and copyright, tax disputes, and contracts. I work with quite a few creative entrepreneurs, such as photographers, artists, and musicians.

Erdal T. on ContractsCounsel
View Erdal
Member Since:
September 15, 2022

Erdal T.

Owner, CEO and Managing Attorney
Free Consultation
Get Free Proposal
New Jersey
17 Yrs Experience
Licensed in NJ, NY
New York Law School

Erdal Turnacioglu of Erdal Employment Law focuses on providing employment solutions to both employees and businesses, whether through litigation, review of employee handbooks, workplace investigations, or training seminars.

Dragan "Dan" I. on ContractsCounsel
View Dragan "Dan"
Member Since:
September 21, 2022

Dragan "Dan" I.

Managing Attorney
Free Consultation
Get Free Proposal
Chicago, Illinois
24 Yrs Experience
Licensed in IL
University of Illinois College of Law

DRAGAN DAN IVETIĆ received a bachelor’s degree in philosophy from Northwestern University in 1996 and went on to the University of Illinois College of Law where he received a Juris Doctorate in 1999, and has been practicing law ever since then. Dragan is currently licensed and authorized to practice before the Illinois courts all the way up to the Illinois Supreme Court, and the United States’ District Court for the Northern District of Illinois. Internationally he is one of a select few American attorneys licensed and authorized to practice before the United Nations ICTY/IRMCT, the International Criminal Court, and the State Court of Bosnia-Herzegovina. His practice has led him across the United States, Europe, and Africa. Dragan has been sought and/or retained for international work alongside local counsel in several European countries, as well as Australia and Africa in private legal matters. Since 2009 he has owned his own law firm continuing with both a domestic and international practice including Trial litigation (including Commercial, Premises Liability, Personal Injury, Criminal Defense, and General Litigation), as well as Transactional work (Contracts, Corporate formation, and Real Estate Transactions). His international practice has included both civil matters and criminal defense, before both the UN ICTY, UN IRMCT, and State Court of BiH. He is a past President of the ADC-ICT (the Official Bar Association of Practitioners before the UN ICTY and UN IRMCT in The Hague) and current officer. He has been involved in multiple ICTY/IRMCT cases. He is also Chair of the ICCBA Defence Committee (the Official Bar Association of Practitioners before the ICC in The Hague). Mr. Ivetić has also been a long-standing member of the ADC-ICT training committee, and served as an instructor/lecturer on Oral Advocacy and Trial Practice for the participants of the ADC-ICT & ICLB Mock Trial since 2014, and has presented Advocacy Training lectures for the ADC-ICT on several topics as well as regularly lecturing to visiting University and Bar groups from around the world. Dragan's practice at this law firm continues with the same diligence and zeal in domestic cases as shown for international cases, with a focus on Trial and Appellate litigation, as well as Transactional work. Perhaps you have a legal matter important to you, or have a loved one that has such a legal matter. Sign up for a free consultation and see if your case will be Dragan's next project. His current firm also is affiliated with the Kansas-Based law firm of Warrior Lawyers International - Kerns Law Group. Through Warrior Lawyers International he and his colleagues have been sought and/or retained for international work alongside local counsel in several European countries, as well as Australia and Africa.

Tina T. on ContractsCounsel
View Tina
Member Since:
October 1, 2022

Tina T.

Free Consultation
Get Free Proposal
New Mexico
1 Yr Experience
Licensed in NM
Arizona Summit Law School

I am a New Mexico licensed attorney with many years of world experience in real estate, transactional law, social security disability law, immigration law, consumer law, and estate planning.

Brent W. on ContractsCounsel
View Brent
Member Since:
December 27, 2022

Brent W.

Free Consultation
Get Free Proposal
Atlanta, GA
16 Yrs Experience
Licensed in GA
Cumberland School of Law

Brent has been in practice since 2007 and been the principal attorney and owner of The Walker Firm, LLC since 2014. Brent focuses on providing an array of general counsel services to individuals and companies in a variety of industries.

Sarah S. on ContractsCounsel
View Sarah
Member Since:
September 22, 2022

Sarah S.

Free Consultation
Get Free Proposal
3 Yrs Experience
Licensed in OK
University of Tulsa College of Law

I have a background in Criminal Law, Family Law, Contract Law, and Environmental Law. I also have five (5) degrees in the following: Here are my degrees and background: 1) B.S. in Environmental, Soil, and Water Sciences 2) A.S. in Pre-Medical Sciences (anatomy, physiology, medical terminology) 3) A.S. in Aircraft Non-Destructive Inspection (science of x-rays, cracks in metal, liquid penetrant, magnetic particle inspections, ultrasonic inspections, and spectrophotometric oil analysis) 4) Master's in Natural Resources Law Studies (1 year focus in the environmental and pollution laws (Hazardous Waste Laws such as RCRA, CERCLA, FIFRA, Natural Resource laws such as ESA, CWA, CAA, FWPCA, Environmental Law, Sustainable Development, and Global Climate Change issues) 5) Juris Doctor and certificate in Native American Law

James G. on ContractsCounsel
View James
Member Since:
September 22, 2022

James G.

Free Consultation
Get Free Proposal
Glendale, Arizona
8 Yrs Experience
Licensed in AZ
Arizona Summit School of Law

I am a lawyer in Glendale, Arizona. I have practiced in contract work including buy/sell agreements, contracts for the purchase of goods and services and real estate. I also practice in bankruptcy law and sports and entertainment law.

Gregory D. on ContractsCounsel
View Gregory
Member Since:
September 30, 2022

Gregory D.

Attorney at Law
Free Consultation
Get Free Proposal
Wake Forest, NC
3 Yrs Experience
Licensed in NC
Norman Adrian Wiggins School of Law at Campbell University

Gregory S. Davis is a native of New York and is a graduate of the Norman Adrian Wiggins School of Law at Campbell University. He also holds an undergraduate degree in Economics from the Wharton School at the University of Pennsylvania and an MBA from Bowie State University. Prior to entering the practice of law, Greg was a Trust officer for one of the largest U.S. Banks, an adjunct professor of finance at Meredith College and a Series 7 licensed financial advisor. Greg is currently the owner of The Law Office of Gregory S. Davis, PLLC ( focusing on Estate Planning, Real Estate and Business Law. Greg is also an adjunct professor of Business Law at Wake Tech.

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call