Convertible Note Conversion Calculator

How it is calculated

Conversion amount = principal + accrued interest. Simple interest: principal × (1 + rate × years). Annual compounding: principal × (1 + rate)^years.

Round price (default, note shares counted in the pre-money, as in most VC term sheets and as on our SAFE calculator) = pre-money ÷ (pre-round fully diluted shares + note conversion shares), solved together with the conversion. The note's dilution therefore falls on existing holders, and new investors get exactly new money ÷ post-money. If you choose "outside the pre-money", round price = pre-money ÷ pre-round shares and the note dilutes the new investors too.

Cap price = valuation cap ÷ pre-round fully diluted shares. Discount price = round price × (1 − discount). Conversion price = the lower of the two (the noteholder gets whichever is better).

Note shares = conversion amount ÷ conversion price. New investor shares = new money ÷ round price. Ownership = each group's shares ÷ total post-round shares.

Assumptions: one note (or several identical notes entered as one), a pre-money valuation cap measured on pre-round fully diluted shares, conversion at a qualified priced financing (not at maturity or a sale), no option pool top-up, no conversion premium or multiple, no rounding. Real notes define "fully diluted" and the cap differently; check your note's wording.

Worked example

$500,000 note at 8% simple interest for 1.5 years converts $560,000. The round is $2M at a $10M pre-money on 10,000,000 shares. The cap price is $5M ÷ 10,000,000 = $0.50. With the note counted in the pre-money, the round price is $10M ÷ (10,000,000 + note shares); at the cap the noteholder receives 1,120,000 shares, so the round price is $10M ÷ 11,120,000 ≈ $0.8993 and the discount price ≈ $0.7194, so the cap applies. New investors receive about 2,224,000 shares; total about 13,344,000. Ownership: existing holders 74.9%, noteholder 8.4%, new investors 16.7% (exactly $2M ÷ $12M). If the note is instead outside the pre-money, the round price is $1.00, the cap still applies (1,120,000 shares) and ownership is 76.2% / 8.5% / 15.2%.

How does a convertible note convert?

At the next qualified priced round, the principal plus accrued interest turns into shares of the new preferred stock at the lower of the cap price and the discounted round price. Investors in the new round pay the full round price.

Cap or discount: which one applies?

Both are calculated and the one that gives the noteholder the lower price per share (more shares) applies. A cap matters when the round valuation is well above the cap; a discount matters when the round valuation is close to or below the cap.

Does interest convert into shares?

In most startup notes, yes: accrued interest converts together with the principal rather than being paid in cash. This calculator assumes it does.

Convertible note vs SAFE: what is the difference?

A convertible note is debt with an interest rate and a maturity date; a SAFE is not debt and has no interest or maturity. Both typically convert at a cap and/or discount. For SAFEs, use the SAFE conversion calculator, which also handles post-money SAFEs.

What is not modelled?

Maturity conversion or repayment, change-of-control premiums, multiple notes with different terms, MFN clauses, option pool top-ups in the round, and shadow preferred share classes.