Calculate conversion scenarios for convertible notes with valuation caps, discount rates, interest accrual, and equity conversion.
Convertible notes turn debt into shares when a financing triggers conversion. This calculator carries the invested principal forward with accrued interest, derives a share price from the valuation cap, derives another from the round discount, and applies the more favorable conversion price to the amount converting. The common surprise is that a valuation cap is not the company's priced valuation or a guaranteed ownership percentage. It is an input to the conversion calculation, and the capitalization definition in the signed note can materially change the resulting share count.
A concrete input and expected output from the current implementation.
Input
Principal: $100,000; annual simple interest: 6%; time outstanding: 12 months; valuation cap: $4,000,000; discount: 20%; next-round pre-money valuation: $5,000,000; next-round price: $1.00 per share; pre-money capitalization: 5,000,000 shares.
Expected output
Accrued interest: $6,000; conversion amount: $106,000; discount price: $0.80 per share; cap price: $0.80 per share; selected conversion price: $0.80 per share; note shares: 132,500.
The discount price is $1.00 x 80% = $0.80, while the cap price is $4,000,000 / 5,000,000 = $0.80. The balance after interest is $106,000, which converts into 132,500 shares at $0.80 per share.
The amount eligible to convert starts with principal and adds interest for the stated period. In the example, one year at 6% adds $6,000 to $100,000. Dates, day-count conventions, compounding, and whether unpaid interest converts are governed by the note, so the displayed total is reliable only when those assumptions match the instrument.
The discount price is the new-money share price reduced by the entered discount. The cap price is the valuation cap divided by the capitalization used for conversion. When both provisions apply, the lower price produces more shares for the same balance. The calculator divides the accrued conversion amount by the selected price to determine the noteholder's conversion shares.
No. The cap limits the valuation used in the note's conversion calculation. It does not set the financing's negotiated pre-money valuation, establish a current fair value, or guarantee a fixed ownership percentage. Ownership also depends on the defined capitalization and on shares issued before, during, or alongside the conversion.
Not as a complete SAFE model. SAFEs generally do not accrue interest or have a debt maturity, and pre-money and post-money SAFE forms handle capitalization differently. A cap-and-discount comparison may still be informative, but note interest and note-specific conversion terms should not be carried over unless the SAFE document expressly contains equivalent mechanics.
The example and behavioral notes were checked against the browser implementation. Standards and primary references below define the relevant format, formula, or platform behavior.
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