Convertible notes are often used to raise early-stage financing for start-up companies, frequently due to their advantages related to delayed valuation, greater speed, and lower cost of completion compared to venture capital financing. As a result, there has been a large increase in the number of early-stage companies raising capital through convertible notes over the past decade. Investors have made this form of financing more available, believing that small amounts of money can significantly advance the development of young companies. Entrepreneurs often find that convertible notes are easier to raise than a first round of venture capital. The ease of convertible note financing, however, sometimes belies the hidden risks and costs associated with its use. This technical note discusses the most frequently used terms and arrangements of early-stage convertible notes, the estimation of the noteholder's equity ownership from delayed valuation, and the costs and risks of this form of financing to both entrepreneurs and investors. The case "MedMetric, LLC: Seed-Round Convertible Note Financing" (UV7929) can be assigned with the note as an application of this form of financing.

This technical note discusses the various financial services segments in which technology solutions have been used to solve problems, including lending, payments, wealth/investment management, insurance, and regulation. For each of the segments, the note identifies key issues facing the segment, why and how fintech might provide an answer to the challenges faced, and the potential difficulties fintech may experience in doing so. For example, in lending, fintechs could solve issues related to access and convenience-without the need for costly infrastructure. The note also discusses the potential advantages/disadvantages of traditional banks over fintechs. Finally, the note describes influential technologies that are used in fintech such as application program interface (API), artificial intelligence (AI), and machine learning.