Convertible Note Calculator
Calculate shares issued and ownership percentage when a convertible note converts at the next funding round.
Handles discount rate and valuation cap terms.
Convertible Note Calculator
A convertible note is a short-term debt instrument used in early-stage startup fundraising. Instead of setting a valuation immediately (which is hard for pre-revenue companies), the investor lends money that converts into equity at the next priced funding round.
Two key protective terms for the investor:
| Term | What it does |
|---|---|
| Discount rate | Investor gets shares at X% below the next round price |
| Valuation cap | Conversion happens at or below a maximum valuation |
The investor always gets the more favorable of the two.
Conversion price calculation:
Discount Conversion Price = Next Round Price × (1 − Discount%)
Cap Conversion Price = Valuation Cap / Total Shares Outstanding (pre-round)
Actual Conversion Price = minimum of the two
Accrued interest:
Convertible notes typically carry interest (often 5–8% per year). The principal plus accrued interest converts — not just the principal.
Accrued Interest = Principal × Rate × (Months / 12)
Total Converting = Principal + Accrued Interest
Shares issued to investor:
Shares = Total Converting / Conversion Price
Resulting ownership:
Ownership % = Shares Issued / (Shares Outstanding + New Round Shares + Investor Shares)
Standard convertible note terms:
Most seed-stage convertible notes carry:
- Interest: 5–8% annually
- Term: 12–24 months
- Discount: 15–25%
- Valuation cap: Negotiated based on startup stage
When this tool is most useful:
Founders and early investors can model how different cap and discount combinations affect dilution. If you raise $500K on a $5M cap and the next round prices at a $10M valuation, the note holders convert at the $5M cap price — meaning they get twice the shares they would at the round price.
SAFE vs convertible note:
Y Combinator’s SAFE (Simple Agreement for Future Equity) is structurally similar but is not debt. SAFEs do not accrue interest and have no maturity date — the conversion mechanics are otherwise the same.
How we build and check this calculator
This calculator runs entirely in your browser, so the numbers you enter stay on your device. The math behind it is written by hand and tested against worked examples and standard references before the page goes live.
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