Convertible Note Calculator for Seed Business Founder

How Convertible Notes Work

Convertible notes are debt instruments that convert into equity at a future priced round. They include terms like interest rate, valuation cap, and discount that determine the conversion price your investors receive.

Modeling Note Conversion

When your Series A closes, outstanding convertible notes convert based on their terms. Our calculator helps you model exactly how much equity note holders will receive and how that affects founder ownership.

How to Use the Convertible Note Calculator

1. Enter your note terms: principal, interest rate, cap, and discount
2. Set the expected Series A valuation and timing
3. See the converted equity and resulting cap table
4. Compare multiple notes with different terms

When to Use This Calculator

• You are raising on a convertible note and want to model conversion at different Series A prices
• You have outstanding notes from a previous round and need to see their impact on your next cap table
• You want to compare the dilution difference between a convertible note and a SAFE
• An investor is proposing specific note terms and you want to understand the long-term cost

Key Metrics and Formulas

Convertible notes accrue interest over time, increasing the amount that converts. The conversion amount equals Principal x (1 + Interest Rate x Time in Years). The conversion price is the lower of (Valuation Cap / Fully Diluted Shares) or (Series A Price x (1 - Discount)). Shares issued equal the conversion amount divided by the conversion price. Unlike SAFEs, notes have a maturity date at which point the investor can demand repayment or negotiate new terms. Our calculator models the interest accrual, both conversion price scenarios, and the resulting share issuance.

Common Mistakes to Avoid

• Forgetting to account for accrued interest: On a 2-year note at 8%, the conversion amount is 16% higher than the principal
• Ignoring the maturity date: If you haven't raised a priced round by maturity, the note holder can demand repayment
• Stacking notes with different caps: Multiple notes at different caps create complex conversion waterfalls
• Not understanding how the discount interacts with the cap: The investor gets whichever is more favorable