Convertible note calculator

How it works

A convertible note is a loan that turns into equity at the next priced round. Unlike a SAFE it carries interest, and the interest usually converts too, so the noteholder converts principal plus accrued interest.

Like a SAFE, a note converts at the better of the valuation cap or the discounted round price. Most note caps are pre-money, so the conversion share is the converting amount divided by the cap valuation plus that amount.

The formula

1. Accrue the interestInterest = principal x rate x months / 12 (simple interest).
2. Find the conversion valuationThe lower of the cap and the next round pre-money x (1 - discount).
3. Work out the stakeStake = converting amount / (conversion valuation + converting amount), then diluted by the new round.

Worked example

A $250,000 note at 6% converting after 18 months accrues $22,500 of interest, so $272,500 converts. With an $8 million cap and a 20% discount on a $15 million pre-money round, the cap applies; after a $4 million raise the noteholder owns about 2.6%.

Put the numbers in your data room

Investors check that every note, its interest rate, maturity date and conversion terms match the cap table. File each note with its signature page and a note register in the equity folder of the data room.

Convertible note calculator FAQ