Glossary Term
Convertible Debt
Definition
Convertible Debt is a type of financing where investors lend money to a company in exchange for a promissory note that can later convert into equity, typically at a discount or pre-determined valuation. In the MedTech industry, it is commonly used by startups and early-stage companies to raise capital while delaying the valuation of the company until a later stage.
Relevance to the MedTech Industry
Convertible Debt provides MedTech startups with a flexible funding mechanism to support research, development, and regulatory activities without immediately diluting ownership or committing to a valuation. It bridges the gap between funding rounds and allows companies to focus on advancing their technology or achieving milestones.
Additional Information & Related Terms
Equity Financing An alternative to convertible debt where investors immediately receive equity in the company.
Seed Funding Convertible debt is often used as a financing tool in early-stage seed rounds.
Bridge Loan Similar to convertible debt but typically not designed for equity conversion.
Runway The amount of time convertible debt extends the company’s operational funding.