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Convertible Note Calculator

The Convertible Note Calculator estimates accrued note balance and the shares issued when that balance converts in a priced financing. It applies simple interest, then compares a cap-derived price with the discounted round price and uses the lower conversion price. Founders and noteholders can use it to preview how principal, time outstanding, interest, cap, and discount interact. The final conversion must still follow the note, financing documents, capitalization definition, and any negotiated amendments.

Inputs

$
%
months
$
$
%
$
Result
—
Estimated note shares on conversion
Principal plus simple interest—
Conversion price—
Controlling term—

1. Enter principal and interest
Use the outstanding principal and contractual annual simple interest rate.

2. Set the time outstanding
Enter the number of months from issuance to the assumed conversion date.

3. Enter cap and round valuation
Provide the valuation cap and priced-round pre-money valuation.

4. Enter discount and share price
Use the conversion discount and the new-money price per share.

5. Review balance, price, and shares
The estimated shares equal the accrued balance divided by the better conversion price.

Accrued balance = Principal × [1 + Annual interest rate × (Months ÷ 12)]Cap conversion price = Round share price × (Valuation cap ÷ Round pre-money valuation)Discount price = Round share price × (1 − Discount rate)Conversion shares = Accrued balance ÷ Lower conversion price

Where:

  • Principal — original note amount
  • Annual interest rate — simple yearly interest as a decimal
  • Months — time outstanding
  • Conversion price — lower of the modeled cap and discount prices

Assumptions: Interest is simple, not compounded. The cap price is modeled with a valuation ratio rather than the full contractual capitalization definition.

What the result means

Interest increases the amount that converts, while a lower conversion price increases the share count.

Some notes compound interest, convert only principal, or include maturity and qualified-financing provisions that require different treatment.

Given: Principal = $500,000; interest = 6%; term = 18 months; cap = $8M; round pre-money = $12M; discount = 20%; round price = $2.

Calculation: Balance = $500,000 × [1 + 6% × 1.5] = $545,000. Cap price = $1.3333 and discount price = $1.60, so the cap controls. Shares = $545,000 ÷ $1.3333 = 408,750.

Result: The note converts into an estimated 408,750 shares.

Does convertible-note interest always convert into equity?

Not always. Many notes convert accrued interest, but the signed terms may provide different treatment.

What if the note has no valuation cap?

Use a very high cap only for scenario testing, or calculate solely from the discount outside this simplified model.

How is a note different from a SAFE?

A note is debt and commonly has interest and a maturity date. A SAFE is generally a contractual right to future equity without interest or maturity.

What happens at maturity?

The note may become payable, extend, or convert under specified terms. The outcome depends on the note and applicable agreements.

Why does capitalization matter for the cap price?

The valuation cap is divided by a contractually defined capitalization. Options, warrants, and other convertibles can affect the denominator and final price.