Convertible Note Calculator
Work out the accrued interest, conversion price and resulting ownership when a convertible note converts with a cap and a discount.
How it works
Interest = principal × rate × (months ÷ 12) · Discount value = pre-money × (1 − discount) · Effective = min(cap, discount value)
A convertible note is a loan that converts to equity at the next priced round, sweetened two ways: it accrues interest that also converts, and it converts at the more favorable of a discount to the round price or a valuation cap. The cap sets a ceiling on the price the note pays, so it wins when the round prices above it — exactly the outcome the note-holder was protecting against. The lower effective valuation means the same dollars buy more shares.
Worked example
A $100,000 note at 6% converting after 18 months accrues $9,000 of interest, converting as $109,000. With a 20% discount the round’s $12M pre-money becomes $9.6M, but an $8M cap is lower, so the cap applies. Converting $109,000 at an $8M effective valuation buys roughly 1.34% of the company.
Frequently asked questions
Does interest convert to equity too?
Usually yes — accrued interest is added to the principal and the combined amount converts into shares at the round. That is why a note held for longer buys slightly more equity, all else equal.
When does the cap beat the discount?
The cap wins whenever the round’s pre-money, after the discount, is still above the cap. In a hot round that prices high, the cap can be far more valuable to the investor than the discount alone.
Is the ownership figure exact?
It is a close approximation that treats the note as buying shares at the effective valuation. Exact ownership depends on the full post-round cap table including the new priced-round money and any option pool, so treat this as a planning estimate.
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Educational estimate, not financial advice.