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Why use a convertible note?

Convertible notes are are often used for early stage financing because it is very difficult to determine how much the business you are investing in is worth (i.e. the valuation). A convertible note allows the business to delay this difficult task to a later date, presumably once they have some revenues or some other form of track record to base the valuation on. Then investors will be investing a discount to that valuation (to account for the fact that they invested at an earlier date.  

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