Convertible Note Conversion Price Calculator

Calculate how your convertible note converts to equity. See exactly how many shares you receive and what percentage ownership you get after conversion.

Original amount invested via convertible note

Annual interest rate on the note (typically 5-12%)

Number of days until conversion (e.g., 2 years = 730 days)

Maximum valuation for conversion (optional)

Discount on future priced round (optional)

Pre-money valuation of the next funding round

Total shares before new investment

Total Due = Principal + (Principal × Interest Rate × Years)\nConversion Price = MIN(Next Round Price, Discounted Price, Capped Price)\nShares Issued = Total Due / Conversion Price\nOwnership % = New Shares / (Existing + New Shares)
Principal: $500,000 | Interest: 8% | 2 Years\nValuation Cap: $8M | Discount: 20%\nNext Round Pre-Money: $12M | 10M Shares Outstanding\n\nAccrued Interest = $500K × 8% × 2 = $80K\nTotal Due = $580K\nDiscount Price = $12M × 80% / 10M = $0.96/share\nCap Price = $8M / 10M = $0.80/share\nFinal Price = $0.80/share\nShares = $580K / $0.80 = 725,000 shares\nOwnership = 6.8%

What is a convertible note?

A convertible note is a short-term debt that converts to equity at a future financing round. Instead of paying back with cash, the investor receives company shares. It's commonly used for seed rounds, bridging to Series A, or between milestone financing.

What is a valuation cap?

A valuation cap sets the maximum valuation at which the note converts to equity, protecting early investors from excessive dilution. If the cap is $8M and the next round is at $12M pre-money, the note converts as if the company is worth $8M, giving the note holder more shares.

What is a discount rate?

A discount rate gives note holders shares at a discount to the next round's price. A 20% discount means if the next round prices shares at $10, note holders convert at $8. This compensates note holders for taking on early-stage risk before the Series A validation.

How is the conversion price calculated?

The conversion price is the LOWER of: (1) Next round price per share, (2) Discounted price (next round price × (1 - discount%)), or (3) Capped price (valuation cap / total shares). This ensures note holders get the best value while capping upside.

How do valuation caps and discounts work together?

Both apply, and the note holder gets the BEST outcome. If discounted price is $8/share and capped price is $9/share, the discount applies ($8). If cap gives $7 and discount gives $9, the cap applies ($7). They work together to maximize early investor protection.

What is accrued interest on convertible notes?

Interest accumulates daily on the principal from the note's start date until conversion. Most notes have 5-12% annual interest. At conversion, accrued interest is added to principal, and the total converts to equity. This rewards early investors for tying up capital.

When do convertible notes convert?

Notes typically have a maturity date (12-24 months) when they must either convert or be repaid. Automatic conversion occurs when a "qualified financing" closes (usually Series A with minimum raise). Some notes include triggering events like acquisition or IPO.

How much equity does a convertible note represent?

It depends on the discount, cap, and next round valuation. A $500K note at $10M cap with 10M shares converting at $10M pre-money = 5% equity. With a $6M cap, same note = 8.3% equity. The cap and discount significantly impact ownership.