Convertible debt financing involves providing a company with a loan that can later be converted to equity shares in the company. It is commonly used as a "bridge" between equity funding rounds. Key aspects of convertible debt include interest rates of 6-10%, conversion discounts of 15-25% off the price of future rounds, and automatic or optional conversion upon certain triggers like new funding rounds or maturity of the debt. While simpler than equity deals in some ways, convertible debt agreements can also become complex with additional terms governing stock rights, board seats, and valuation caps. Both entrepreneurs and investors face pros and cons from using convertible debt versus traditional equity.