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.