Note Conversion, Pre-Money vs Post-Money Method

Calculates how a convertible note converts under the fixed pre-money versus fixed post-money methods, and the founder ownership gap the choice of method creates. Inputs are founder shares, the pre-money valuation, round size, note principal, interest rate and years outstanding, and the conversion discount.

Interactive Tool

Founder shares outstanding

Pre-money valuation

New round size

Note principal

Note interest (simple)

Years outstanding

Conversion discount

Fixed pre-money · founders keep

67.0%

price $1.125 · note at $0.844

Fixed post-money · founders keep

63.0%

price $0.945 · note at $0.709

Note balance

$1.08M

principal × (1 + r × yrs)

Fully diluted (pre / post)

11,946,667 / 12,698,413

shares under each method

Ownership gap

4.0 pts

same headline valuation

The same headline valuation, two founder outcomes, the post-money method drops the share price to fit the converting note inside the valuation, so the founders absorb the difference. The label alone never tells you who bears the dilution: build the pro forma cap table for the specific term sheet.

Learn the concept

This calculator comes from the free Entrepreneurial Finance course, where the concept is taught with readings, worked examples, and practice questions.

Open Entrepreneurial Finance

Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.