# Convertible Note & SAFE Valuation Calculator Calculate startup convertible note and SAFE conversion share price, post-conversion ownership, and founder dilution impact. --- - **Canonical URL:** https://dothecalculation.com/calculators/convertible-debt-pricing-calculator - **Category:** Financial calculators - **Publisher:** Do The Calculation (https://dothecalculation.com) - **Cost:** Free, no account or sign-up required - **Privacy:** Runs entirely in the browser; inputs are never sent to a server - **Methodology:** https://dothecalculation.com/methodology --- ## Convertible Note & SAFE Valuation Calculator Model convertible note and SAFE conversions during a Series A equity round, calculate share prices, interest accruals, cap/discount impacts, and founder dilution. - Valuation Cap vs. Discount Rate conversion paths - Accrued interest calculators - Pre-money and post-money cap table impacts ## Convertible Notes and SAFEs in Startup Finance Convertible Notes and SAFEs (Simple Agreements for Future Equity) are financial instruments commonly used by early-stage startups to raise seed capital without establishing an explicit valuation. Instead of issuing priced shares immediately, these instruments defer valuation until a subsequent priced equity round (typically a Series A financing). At the priced round, the outstanding principal (plus accrued interest, in the case of convertible notes) converts into preferred stock. To reward early investors for taking higher risk, notes and SAFEs convert at a discount or subject to a valuation cap. ## How to Use This Calculator Enter the note principal, its coupon interest rate, the number of days outstanding, the valuation cap, the discount rate, and the Series A share price and pre-money shares outstanding. The calculator computes the accrued interest, compares the cap-derived and discount-derived share prices, converts at whichever produces the lower price (more shares for the noteholder), and shows the resulting shares issued, noteholder ownership percentage, and which mechanism (cap or discount) governed the conversion. ## Worked Example: $1M Note, $6M Cap, 20% Discount Principal $1,000,000, coupon interest rate 6%, 365 days outstanding, valuation cap $6,000,000, discount rate 20%, Series A share price $2.50, pre-money shares outstanding 4,000,000. Accrued interest: $1,000,000 × 6% × (365/365) = $60,000. Total conversion balance: $1,060,000. Cap-derived share price: $6,000,000 ÷ 4,000,000 shares = $1.50. Discount-derived share price: $2.50 × (1 − 20%) = $2.00. The cap price ($1.50) is lower than the discount price ($2.00), so the note converts at the cap — the mechanism that favors the noteholder in this scenario. Note shares issued: $1,060,000 ÷ $1.50 ≈ 706,667 shares. Post-money shares outstanding: 4,000,000 + 706,667 ≈ 4,706,667. Noteholder ownership: ≈ 15.01%, leaving the founders and existing shareholders with roughly 84.99% of the post-conversion cap table. ## Valuation Caps and Conversion Discount Rates Convertible instruments feature two primary investor protection mechanisms, converting at the path that yields the lowest share price (most shares): **Valuation Cap**: Sets the maximum pre-money valuation at which the note converts. If the Series A valuation exceeds the cap, the note converts at the cap-derived share price, granting the investor more shares: $$\text{Cap-Derived Share Price} = \frac{\text{Valuation Cap}}{\text{Pre-Money Shares Outstanding}}$$ Where **Pre-Money Shares Outstanding** typically includes all outstanding common shares, options, and any new option pool increases. **Discount Rate**: Grants investors a percentage discount (usually 10% to 20%) off the priced round share price: $$\text{Discount-Derived Share Price} = \text{Series A Share Price} \times (1 - d)$$ Where \(d\) is the discount percentage. ## Accrued Interest Calculations for Convertible Notes Unlike SAFEs, convertible notes are debt instruments that accrue interest over time. The accrued interest is added to the principal balance at conversion, increasing the total conversion value: $$\text{Total Conversion Value} = \text{Principal} \times \left(1 + r \times \frac{\text{Days}}{365}\right)$$ Where \(r\) is the annual simple interest rate and \(Days\) is the number of days from issuance to the closing of the priced round. ## Dilution and Post-Conversion Ownership When convertible notes convert, new shares are issued, diluting the ownership of existing common shareholders (founders and early employees). The post-conversion ownership percentage for the noteholder is calculated as: $$\text{Ownership \%} = \frac{\text{Note Shares Issued}}{\text{Series A Post-Money Shares Outstanding}}$$ Understanding these dynamics is critical for founders to manage dilution and understand how much of the company they will retain post-Series A. ## Related Calculators Sanity-check the Series A pre-money valuation itself with the [DCF calculator](/calculators/corporate-valuation-dcf-calculator), or once the round is priced, model how it affects overall investor returns with the [ROI calculator](/calculators/roi-calculator). ## Frequently asked questions ### What is the main difference between a SAFE and a Convertible Note? A SAFE is not debt; it does not accrue interest, has no maturity date, and does not require repayment. A convertible note is debt, accrues interest, features a maturity date, and can legally default if not converted or repaid. ### How do you calculate the actual share price at conversion? The conversion share price is the lower of the Cap-derived share price (Valuation Cap / Pre-Money Shares) or the Discount-derived share price (Series A Price × [1 - Discount %]). ### What is a priced round? A priced round is an equity financing round (like a Series A) where investors buy shares in the company at a mutually agreed-upon per-share valuation. ### What is a post-money SAFE? A post-money SAFE calculates conversion ownership based on the post-money capitalization of the company immediately before the priced round, providing investors with locked-in ownership percentages. ### How does interest accrue on a convertible note? Interest typically accrues as simple interest annually. It is calculated from the note issuance date to the conversion date and added to the principal. ### What happens at note maturity? At maturity, if no equity round has occurred, the noteholder can demand repayment of principal plus interest, extend the maturity date, or convert the note into equity at a pre-negotiated valuation. ### How does the option pool increase dilute founders? Lenders typically require the pre-money option pool to be expanded to cover 10-15% of the post-money shares. This expansion is completed before the priced round, placing the dilution entirely on the existing common shareholders (founders). ### Can a SAFE have both a cap and a discount? Yes. If a SAFE has both, it converts using whichever mechanism gives the investor the lower share price (highest number of shares). ### What is pre-money capitalization? It is the share count of the company before the priced round, including outstanding common stock, preferred stock, and vested/unvested options. ### How do noteholders impact the cap table? Noteholders convert into preferred shareholders alongside the new Series A investors, diluting the common shareholders (founders) but establishing clear equity ownership. ## Related concepts - **Valuation Cap** — The maximum valuation threshold at which debt converts into equity. - **Dilution** — The reduction in ownership percentage caused by issuing new shares. - **SAFE** — Simple Agreement for Future Equity, a flexible seed-stage financing agreement. ## Related guides - [Business Valuation Methods: A Practical Owner Guide](https://dothecalculation.com/blog/business/business-valuation-methods) — Compare market, income, and asset valuation methods, normalize revenue and profit, and use multiples as a planning range rather than a formal appraisal. ## Related calculators - [Startup Equity Dilution & Cap Table Simulator](https://dothecalculation.com/calculators/startup-equity-dilution-calculator) — Simulate venture capital seed and Series A funding rounds, share pricing, option pool dilution, and founder equity ownership stakes. - [M&A Accretion/Dilution Calculator](https://dothecalculation.com/calculators/mergers-acquisitions-accrual-calculator) — Analyze pro forma financial impacts of a merger, combined earnings per share, and synergy break-even targets for M&A deals. - [Discounted Cash Flow (DCF) Calculator](https://dothecalculation.com/calculators/corporate-valuation-dcf-calculator) — Estimate a company enterprise and equity value using a multi-year discounted cash flow model with terminal value assumptions. - [LBO Model & Debt Schedule Calculator](https://dothecalculation.com/calculators/lbo-model) — Evaluate leveraged buyout returns, debt payoff schedules, multiple of invested capital, and internal rate of return metrics. - [Business Valuation Calculator](https://dothecalculation.com/calculators/business-valuation-calculator) — Estimate your business value using practical valuation methods such as earnings multiples and asset-based approaches for buyers or investors. - [Capital Expenditure (CapEx) ROI Calculator](https://dothecalculation.com/calculators/capex-roi-calculator) — Evaluate capital expenditure projects using return on investment, simple payback period, and net present value metrics before you invest. --- _This tool is for educational purposes only. 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