What is the difference between a valuation cap and a discount rate?

A discount rate gives note holders a fixed percentage discount (usually 15-25%) off the Series A price. A valuation cap sets an upper ceiling on the company valuation used to set the note holder's conversion price.

Updated: August 2026 • Verified v1.2

Convertible Note Seed Round Financing & Dilution Calculator

Finance & MathPopular

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Cap_Price = Cap / Existing_Shares; Discount_Price = SeriesA_Price * (1 - Discount); Eff_Price = Min(Cap_Price, Discount_Price)

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Understanding Your Results

Calculates total conversion amount (principal + accrued interest), evaluates discount price vs cap price to identify the controlling mechanism, and models post-money shares and percentage ownership for founders, note holders, and new Series A investors.

Practical Guidance & Next Steps

Convertible notes typically specify that investors receive whichever mechanism yields the lower share price (higher share count). If the Series A valuation exceeds the valuation cap, the cap will almost always govern.

What is this?

A startup venture finance calculator that models convertible debt interest compounding, conversion share prices, and post-Series A cap table equity.

How does it work?

1. Enter note principal, annual interest rate, and months to qualified round. 2. Input valuation cap, discount rate, and Series A terms. 3. View governing conversion price, share counts, and post-round equity percentages.

Why use it?

Prevents founders from being blindsided by unexpected dilution when convertible notes convert at Series A.

Technical Scope & Calculation Limitations

Models standard single-note or consolidated seed-round convertible debt conversion.

Frequently Asked Questions

Interest accrues on the principal amount until conversion. Upon qualified financing, the total principal plus accumulated interest converts into shares rather than being paid in cash.

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