Work out the principal, accrued interest and conversion ownership of a convertible note.
Convertible notes accrue interest that converts into equity rather than being repaid, so the amount converting is larger than the cash invested. Applying the discount to the cap gives the effective valuation and therefore the ownership. Eighteen months of accrued interest at 6% adds 9% to the converting amount, which is real dilution founders rarely include in their cap table model.
Convertible Note
Conversion amount = principal + principal × rate × months ÷ 12
Conversion amount = principal + principal × rate × months ÷ 12 Convertible notes accrue interest that converts into equity rather than being repaid, so the amount converting is larger than the cash invested. Applying the discount to the cap gives the effective valuation and therefore the ownership.
Eighteen months of accrued interest at 6% adds 9% to the converting amount, which is real dilution founders rarely include in their cap table model.
This calculator takes 5 inputs: Note principal, Annual interest rate, Months outstanding, Valuation cap, Discount to the priced round. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.