Convertible note calculator pre money.
In 2018 we released the “post-money” safe.
Convertible note calculator pre money Jan 8, 2015 · Manage your convertible note, seed round and series-a as well as ESOP option pool with this excel calculator. The post-money valuation can simply be calculated by adding the Nov 27, 2023 · The solution is to determine the economic value that the convertible notes represent in the fully diluted pre-money and then calculate the different entry prices: Step 1 : Calculate the economic value of the convertible note in the fully diluted share capital by determining the expected return on the convertible based on the agreed discount: After the pre-money valuation, what gets counted as part a company's pre-money fully-diluted capitalization has the biggest impact on relative ownership stakes in a company after a financing. Raising money via convertibles #. Pre-money valuation cap = $5 million India (Head Office) Pune: Office No 1 S No 50/15/1 Samarth Sankul, Narhe, 411041 India Offices. Suppose a startup has raised $1 million in pre-seed convertible note financing. A pre-money valuation is the valuation of the company immediately before the company receives the investment in the financing in question. 50 per share (=$15MM pre-money valuation / 10MM shares outstanding). The difference between the Pre-Money and Post-Money SAFE is that with a Pre-Money SAFE, the conversion into equity does not include the conversion of the SAFEs in its calculation. A Pre-Money SAFE means that, when a SAFE converts based on the valuation cap, it calculates the conversion price per share based on the Company Capitalization EXCLUDING shares issuable to convertibles (SAFE + convertible notes). 00% – 3. Convertible Notes, you should check out our article about that here). 75. Founders: Booyakasha. You accept money from several investors through SAFE agreements. 67. This is illustrated in the middle cap table below. 75 = $9,900,000 Dec 26, 2024 · How will the valuation cap of the convertible note affect the conversion price if the company’s post-money valuation is $750,000? If the pre-money valuation is $750,000 and the valuation cap on the convertible note is $500,000, what will be the conversion price? Calculator Apps. While the pre-money valuation stays fixed at $8m (Or effective pre of $6. Carta’s SAFE and Convertible Note Calculator empowers you to run these calculations with ease, allowing you to: View pre and post-money dilution before and after a future priced round, visualizing your ownership at multiple future valuations. Calculate your SAFE terms. 90625% = 74. You can set up your model in seconds and run as many scenarios as you’d like—all you need are a few inputs: See full list on eqvista. Post-Money SAFE. 86), the post-investment percentage ownership of the Series A Investors is 17. Bangalore: S-620, Manipal Center, Ashok Nagar, Bengaluru, Karnataka 560025 Aug 9, 2024 · What is a convertible note? A convertible note, or convertible debt security, is debt that can convert into equity upon a future qualifying event or transaction, such as a priced equity round raised from venture capital investors. Note conversion shares will be factored into the pre-money, resulting in no dilution to new investors. You own about 60%. Effortlessly estimate convertible note conversions into equity with our convertible calculator, simplifying ownership calculations and future equity planning. Priced round vs. How does a convertible note work? As debt instruments, convertible notes come with an interest rate and a maturity Oct 25, 2019 · Conversion value = Loan note balance x Pre-money Valuation / Cap Conversion value = 108,000 x 3,000,000 / 2,000,000 Conversion value = 162,000 Convertible Loan A pre-money SAFE is one whose capitalisation definition only includes existing shares, option grants and shares reserved for unissued options. This lowers the effective pre-money valuation to $2,750,000 and dividing that valuation by the number of outstanding shares we get a price per share of $2. You invest $25k in a startup’s seed round using a convertible note with a $5M cap, 20% discount 2. Let’s focus on the first methodology: The pre-money method. 00 per share ($8 million divided by 1 million shares) and the conversion price for the notes or Safes would be $5 May 21, 2018 · To start off, here are the three ways to calculate the convertible notes: Pre-money method. 699 / share. Interest on convertible notes ranges from 2% to 8%, but it’s typically 5% or 6%. Pre-SAFE notes are more difficult to calculate ownership when there are more investors and notes compared to Post-SAFE notes. The issuance of Convertible notes and SAFEs do not yet give the owners of those instruments ownership of shares, just the right to purchase at a time in the future at a price to be determined. Learn the difference between pre-money and post-money SAFEs and Oct 24, 2019 · I’ve written several posts on structuring seed rounds, and how for seed rounds on the smaller side ($250K-$1MM) convertible notes are by far the dominant instrument that we see across the country. By “post-money,” we mean that safe holder ownership is measured after (post) all the safe money is accounted for - which is its own round now - but still before (pre) the new money in the priced round that converts and dilutes the safes (usually the Series A, but sometimes Series Seed). It typically ranges from 5% to 10% annually, paid out not in cash but by adding to the principal amount, which then converts into equity at the conversion trigger event. Your stuff on convertible notes is the best out there. SAFEs convert to equity when the company raises a priced round in the future or is sold. Like many loans, convertible notes come with maturity dates. Share price = Pre-money valuation/pre money total shares = 4/6 = $0. They are primarily used for early-stage financings, but they are also a good solution for a bridge round when a company isn’t quite ready for the next equity financing round. Once a milestone is reached, the convertible note automatically Nov 13, 2023 · Note that the conversion price of a pre-money SAFE is determined by taking the pre-money valuation and dividing it by the pre-money capitalization, which also includes the option pool: Conversion Price = $20,000,000 / (10,000,000 + 1,774,194 shares) = $1. Before accepting capital from the convertible noteholder, the startup is 100% owned by the two founders, who collectively own 10 million shares. Furthermore, there is an implied expectation that founders have one and know how to do them. We take the discount: divide 1,000,000 by 0. Post Money valuation is the Pre Money valuation plus the Cash raised Jun 4, 2023 · Convertible Note Calculator; Templates. Dec 11, 2023 · Interest Rate and Conversion Trigger. Using the example above, if the company has a post-money valuation of $10 million and the investors propose investing $2. Feb 15, 2024 · Founders Post-Money Capitalization Ownership Percentage: We calculate the founders’ post-money ownership percentage using the same method as before, except now we need to adjust to accommodate the new investor, the ESOP, and the convertible notes (100% – 6. The tab ' Convertible Notes' is where you input your convertible notes. They are paid back with equity in the company rather than principal or interest. The difference lies in how pre-money and post-money SAFEs calculate “company capitalization”: For pre-money SAFEs,” company capitalization” excludes all securities converting in the financing (such as SAFEs and convertible notes), called “converting securities. Convertible securities are then automatically converted to actual equity shares at a later time, during the first priced round. Financial Projections Template; In the case of Kevin, the pre-money is (250k/30%)*70% =583k and in the case of Jim, (200k Pre-money and Post-money Valuation Cap: While pre-money valuation caps were prevalent in the early days of the SAFE agreement, post-money valuation caps have become more common in both SAFEs and Convertible Notes. Carta’s pre-money or post In 2018 we released the “post-money” safe. For example, if you are raising $500,000 at a valuation of $1,000,000, that likely means your pre-money valuation is $1,000,000 and your post-money valuation will be $1,500,000 (your pre-money valuation + the amount you raise). Using the assumptions above, the price per share for the new investors would be $8. 3531 is lower than the discounted price of $0. The pre-money value can be calculated by subtracting the investment amount from the post-money value. 25% - 15% - 3. We will continue to make forms and other documents available as we continue to receive feedback about the library of documents on Cooley GO, and what additional documents you would find useful. The value of the note is equal to the present value of the future income that the convertible note will receive, discounted to the present value based on its associated risk. like your ownership being based on post-money valuations and not pre-money. . Investors often will negotiate to include a cap in a convertible note because it is the investors' early investment that allowed the company to achieve the high pre-money valuation in the Series A Preferred Stock financing, so they should benefit from the cap in the situation where there is significant increases in valuation between the time The original SAFE was a pre-money SAFE that was developed for the Y-Combinator group in late 2013 as an alternative to convertible notes (if you are looking for more info about SAFEs vs. Convertible notes and SAFEs help startups get money when the finances aren’t clear. This calculation can give you insights into how much ownership will be diluted when the convertible note is converted into shares. Using the set assumptions, the price per share for the new investors would be $8 per share and the conversion price for the note would be: $8 – 30% discount on one share = $5. 00 IF we apply the discount, the price per share would be $4. Jul 16, 2019 · The convertible note calculator calculates the percentage shareholding, number of shares, and value held by the investor, noteholder, and founders of the business, following the conversion of the loan note and the injection of the additional investment. 4124, we use the cap price as the conversion price. 25% – 15. It’s a large change from the original pre-money SAFE that was released in 2013. Mar 6, 2020 · A convertible note calculator is a spreadsheet that calculates the ‘value’ of a convertible note upon conversion into equity under different scenarios. We're experiencing issues authenticating your credentials. Sitwell Ventures knows that a post-money cap is more investor-friendly, but it is willing to offer a convertible note with a pre-money Jul 15, 2023 · Step 1. 5% and the post-money valuation implied by this method is $11. Jul 2, 2021 · When an investor pays you for a convertible note, they’re lending you money. Maturity date. More importantly, it helps you to not confuse ‘basic’ stuff like your ownership being based on post-money valuations and not pre-money. Pre-Seed Convertible Note Assumptions. Scenario 1: all at once conversion If the outstanding convertible notes were to convert all at once at the Series A equity round, then investors in the Seed-1, Seed-2, Seed-3, Seed-4, and Seed-5 convertible note rounds would convert at the same time. Feb 24, 2025 · Without a valuation cap, the monies from the convertible note will buy in directly alongside the SEED money at $1. Plan ahead for your next fundraising round with this free SAFE and convertible note calculator. 8 giving us a note value of $1,250,000. Since the cap price of $0. Pre-Money SAFE Notes focus on the company’s valuation before the SAFE note investment. Jan 24, 2022 · In the pre-money method, the pre-money valuation of the company is fixed and the conversion price for the notes or Safes is determined based on that. If, at the Series A, the startup raises money from a venture capital firm that invests at a pre-money valuation of $10M with a per share price of $5. e. These notes are short-term debt that can be converted to equity in the issuing business. Now, we can apply the 20% discount to the Pre-money Share Price, giving us $0. This is the best for you. Apr 28, 2023 · The post-money valuation then is equal to the company’s pre-money valuation plus the amount invested in the company in the financing round, either in new money or convertible securities. Please try again. And because the valuation cap is the same as the pre-money valuation of this qualifying financing event and there is not a specific discount written in the agreement, the discount is calculated as follows: Effective discount = 1 - cap/pre-money valuation = 0 First, a disclaimer: I am not a lawyer or a financial advisor and am not offering financial or legal advice. Concepts you should have learned: convertible notes, SAFEs (and discounts) pre money vs post money When the time comes for you to convert your convertible note, you need to have a full understanding of the different conversion methods to be able to negotia There are 3 different calculation methods to calculate the price per share to which a note converts at, each differing in the variable being fixed: the Pre-Money Method, Percentage-Ownership Method, and the Dollar Invested Method. The series A investors got 17% of the company and the founders and seed/angels got the rest. ” Sep 13, 2024 · Our generators include both the original “pre-money” forms of SAFE and the newer “post-money” forms of SAFE. original safe was based on a pre-money valuation). Every convertible note has a maturity date, typically set at 18 – 24 months after the note is purchased. Convertible Note Conversion Price Calculation AI supported The basic concept for valuing a convertible note is the same in theory as the valuation of any other financial asset. The investors loan money to the startup. Equidam. 84375%). See the pre-money method in the convertible note calculator below. YC then updated their standard template to be a Post-Money SAFE in 2018. If the issue persists, please reach out to Carta Support. May 22, 2023 · A pre-money valuation cap is similar to a post-money cap except that it does not take into account SAFEs and convertible notes when determining the Company Capitalization used to calculate the conversion price. Calculate Dilution Impact for Employee Stock Options Feb 27, 2025 · They offer a way for investors to convert their investment into equity at a later date, often during a future funding round. Learn how you can issue a SAFE on Carta’s platform here. Aug 30, 2022 · SAFEs, unlike convertible notes, are not debt, do not carry interest, do not have a maturity date. There are 3 different calculation methods to calculate the price per share to which a note converts at, each differing in the variable being fixed: the Pre-Money Method, Percentage-Ownership Method and the Dollar Invested Method. Now consider how the ending cap table from Scenario 1 would differ if the convertible debt investor had a pre-money valuation cap of $5m. From this, you can easily add in the values to the Eqvista app for each kind of shares or convertible notes offered, and the convertible note calculator in the application will take care of the rest. In our previous video, we explained the Pre-Money Method, its advantages and disadvantages. The startup is officially valued at $20 million and the investor learns that her $1 million investment has converted into a 5% ownership stake. 43m ($2m divided by the % ownership stake, 17. The Carta calculator covers the following convertible instruments: Pre-money SAFEThe valuation cap on a SAFE refers to the pre-money valuation. Product release notes . - Discount rate: The note holder gets a discount on the stock price, which will be established using the future funding round (The discount is Apr 1, 2025 · The conversion price for the investor’s pre-money SAFE shares is calculated by dividing the pre-money valuation cap by the company capitalization (excluding SAFEs and convertible notes). In general, the reason to go with a note is a shorter time period to receive seed funding and lower associated cost, though the cost of a priced equity round has come down. It is a type of convertible note that is commonly used by startups to raise funds in an early seed round. Formula: Pre-Money Value = Post-Money Value – Investment Amount. Jul 25, 2024 · Pre-money valuation is calculated using either the Comparable, Venture Capital, or Berkus method. 60 per Sep 18, 2024 · What is SAFE Note? SAFE Note—or “Simple Agreement for Future Equity”—is a form of early-stage startup financing introduced by Y Combinator in 2013. Feb 20, 2023 · Pre-Money vs. What are SAFE Notes? SAFE stands for Simple Agreement for Future Equity. 00 times Convertible notes are a way for seed investors to invest in startups that aren't yet ready for pre-money valuation. Aug 29, 2024 · The two most common types of convertible securities are SAFEs (Simple Agreements for Future Equity) and convertible notes. - Interest Rate: The holder of the convertible note earns interest on the note, the interest, which accrues throughout the term, gets added into the total value of the note when converted to shares. SAFE's can also be input in this sheet, they are functionally equivariant to convertible Jun 24, 2020 · Our SAFE and convertible note calculator will help you understand the potential dilutive impact of pre-money SAFEs, post-money SAFEs (aka YC SAFEs), and notes once they convert in a future priced round. Y-Combinator released the new post-money SAFE in October 2018. A post-money SAFE is one whose capitalisation definition includes, existing shares, options, shares reserved for unissued options and any shares issued to convertible securities such as SAFEs. Oct 31, 2017 · Cap table math is confusing. When fleshing out your convertible note, the interest rate is another negotiable term that often comes into play. we break down the differences between SAFEs and convertible notes. Dec 27, 2023 · Pre-Money Ownership Percentage: We calculate the pre-money ownership percentage using the same method as before, except now we need to adjust to accommodate the new investor, the ESOP and the convertible notes (100% - 6. Jun 23, 2024 · This implies a $40 million pre-money valuation ($40 million pre-money + $10 million investment = $50 million post-money), and in this case the investor would be making an offer for 20% of the company, because $10 million (the size of the offer) is 20% of $50 million (the post-money valuation). In exchange, they can collect interest on the value of the note. You can set up your model in seconds and run as many scenarios as you’d like—all you need are a few inputs: Jun 24, 2023 · In this post, we’ll review what SAFEs are, the key terms, and walk through examples of developing a cap table for post-money and pre-money SAFEs. In the case of a liquidation event such as an acquisition, convertible noteholders usually have two options, depending on the negotiated terms. For the example with two post-SAFEs (pre-money valuation of $15M, raise $5M), the YC post safe primer attached shows 448,671 pro-rata shares for Investor B (SAFE 2 in the calculator) worth ~$500,000 while the 50Folds calculator shows 273,276 pro-rata shares (Cell C124) worth $305,052 (Cell D26). Determine the Conversion Price and Shares. Understanding the difference between pre-money and post-money SAFE notes is essential for both investors and entrepreneurs. SAFE notes are financial instruments designed to streamline early-stage funding processes, offering a more straightforward alternative to traditional convertible notes (i. Carta’s free SAFE calculator for founders allows you to model out your SAFEs and convertible notes. Consequently, a Post-Money SAFE does include the conversion of the SAFEs in the equity calculation. Dilution gets shared with the VCs; Nov 16, 2021 · Convertible notes and pre-money SAFEs are a quick and simple way to raise funds prior to money rounds (Series A, B, C etc. Apr 25, 2016 · We have one $1,000,000 note at a 20% discount. Remember that the convertible notes Dec 6, 2023 · Using those assumptions, we can divide the investment size by the ownership percentage, and then subtract the investment amount to calculate the pre-money valuation. 5155. This Before the convertible note agreement is signed, the company is owned by two founders with 1 million shares each (2 million total). You can set up your model in seconds and run as many scenarios as you’d like—all you need are a few inputs: For instance, if the convertible note term sheet stipulates that conversion will only happen if $2M or more is raised, but only $1M is raised, the convertible note would not yet convert to equity. Mar 25, 2025 · Pre-money Share Price = $6,000,000 / 11,639,396 = $0. When an investor issues a convertible note, they are lending money to the company, with the understanding that the company will have the option to convert the note into equity at a later date. About us Careers Equidam Research Center Aug 13, 2020 · Convertible notes are a great tool for venture financing. The formula used to derive the price per share (PPS) than an investor will pay for a company's stock is the following: Analyze up to 10 Convertible Notes and/or pre-money SAFEs, combined with up to 10 post-money SAFEs; Each Note or SAFE can have its own discount rate and valuation cap (pre-value cap or post-value cap for the pre-money SAFE and the post-money SAFE respectively) Part 2: Convertible Note Conversions in a Series A Round (Valuation Caps and Conversion Discounts) with an Options Pool. See less Jun 24, 2020 · Our SAFE and convertible note calculator will help you understand the potential dilutive impact of pre-money SAFEs, post-money SAFEs (aka YC SAFEs), and notes once they convert in a future priced round. There are 3 different calculation methods to calculate the price per share to which a note converts at, each differing in the variable being fixed: the Pre-Money Method, Percentage-Ownership Method, and the Dollar Invested Method. SAFEs and convertible notes May 5, 2010 · the amount you’re raising on the convertible note (say $500k), the conversion discount of the note (say 20%), the pre-money valuation cap of the note (say $4m), the percentage of your company which the VCs will take in your Series A (say 30%), the amount of money you expect to raise in your Series A (say somewhere between $1m and $5m). May 24, 2019 · Tl;dr: Free SAFE calculator in Excel to calculate the post-money and pre-money SAFE from Y-Combinator. Mar 4, 2021 · Pre-Money Valuation using Startup Falcon Valuation Calculator: $3,600,000 Current Valuation * Valuation Cap Multiplier = Max Valuation $3,600,000 * 2. A post-money valuation and a pre-money valuation are just two different ways of framing the same valuation of the company, but at different points in time. When SAFEs had pre-money valuation caps, they gained quite a bit of traction in Silicon Valley and pockets of other markets, but outside of SV May 20, 2024 · Calculating the pre-money value involves a straightforward formula that is essential for both investors and founders to understand before entering any funding negotiations. Determining the post-money cap table for an equity round with an option pool refresh and one or more convertible notes converting to equity can be overwhelming. , debt instruments that can be converted into equity). I was wondering, in case the company has a down-round and its Series A pre-money valuation is lower than “Convertible note Principal Plus Accrued Interest”, it seems the math breaks down as it results in a negative effective pre-money valuation (using % ownership method). A convertible note is debt—the investor provides your company with funding that must be paid back, with interest, either in the form of shares or cash, when the debt matures. We’ll assume here that this startup plans to raise $5 million at a $10 million pre-money valuation. That means the post-money valuation is $5 + $10 = $15 million, so the VC firm expects to own ~33% of the company: Pre-money valuation: this is the value of your business before you bring in new investment. May 19, 2023 · Let’s deep dive into how the cap table would look under both conversion scenarios: 1. Jun 12, 2023 · Convertible notes vs. Post-Money Valuation Calculation Example. What is a Post-Money SAFE Calculator? It’s a free and very detailed Excel calculator which will show you in detail how both Pre and Post- money SAFE notes are calculated. It is ok to leave either cap or discount blank. Aug 16, 2024 · SAFE and convertible notes calculator. Input the existing shares outstanding, the amount of the convertible note, and the conversion price per share to determine the ownership percentage after conversion. A cap table is something that every startup needs, but something no one really knows how to do. 5%). Convertible Note Calculator SAFE Calculator Help center FAQs Partners Articles Monthly Newsletter Other Resources. Usually only contains founders and maybe some early employees. Say you’re raising a seed round. Post-money valuation is calculated by adding the investment amount onto the pre-money valuation amount. Convertible notes, on the other hand, are a type of debt instrument that is issued by the investor, rather than the company. Pre Money is the company’s valuation before Cash is injected. • The pre-money method benefit the founder as they don’t get diluted as much as in the other methods. Post-money valuation caps offer simpler math for determining the investor's ownership percentage because the percentage for each May 11, 2023 · If we weren’t given this information, we could still calculate the pre-money valuation using option two above and then simply calculate the post-money valuation using the result: Post-money valuation = pre-money valuation ($10,000,000) + investment amount ($1,000,000) = $11,000,000 This article will provide you with information about the implications of SAFEs and convertible notes on value, how to calculate pre and post-money valuation, and what the distinctions are between pre-money and post-money valuations. Press . This means that post-money convertible note holders dilute the stakes of existing shareholders: it's always worth paying attention to the convertible note terms, as the pre- or post-money status can have a real impact on dilution in new funding rounds. Convertible note (assume pre-money approach)The convertible note model assumes the pre-money Before converting a convertible note, you must understand the different conversion methods to be able to negotiate better terms with an investor. SAFEs. The most common convertible securities are convertible notes and SAFEs (Simple Agreements for Future Equity). It will help you see much ownership % each of your convertible notes converts to for each series funding . It’s the only one on the internet. You can use the calculator to model different scenarios for how to fund your company with SAFEs before trying to raise a priced round. Calculate the value of your convertible note with Equidam's easy-to-use online calculator. Pre-Money Valuation = ($5 million ÷ 20%) – $5 million = $20 million; 3. Post-money SAFE (ownership % SAFE / YC SAFE):The valuation cap on a SAFE refers to the post-money valuation. The value is often expressed as the percentage of shares that the convertible note holder will hold in the company once the convertible note converts into equity. Y-Combinator released the new post-money SAFE in October Let’s do numerical example ignoring any accrued interest: 1. Dec 4, 2023 · Capbase has created template convertible note agreements and tools to issue standard convertible notes to make getting funding for a startup as simple as possible. Mar 26, 2020 · The first method is the pre-money method where the pre-money valuation of the company is fixed and the conversion price of the notes is determined based on that. 4124. Quickly calculate the impact of issuing a Convertible Note with cap, discount and interest on your cap table. Using the same facts as the first scenario, the amount of stock issued to all shareholders except for the angel investor would remain the same. Convertible notes amount to a loan offered by investors that can convert to preferred stock at a later funding round when a valuation may be easier to determine. A Word About The Valuation Cap While the valuation cap is not a “valuation” in the sense of a 409a valuation, it is one of your overall valuation methods it does set the tone for In the first tab ' Pre-Investment Cap Table' add your current cap table. com Aug 16, 2024 · → Check out our free SAFE and convertible note calculator to understand the potential future impact before they convert in a priced round. Oct 15, 2013 · Let’s revisit our pithy lead: “We raised 4mil A round at 20 pre” Now you know that 20MM pre-money + 4MM round = 24 MM post money valuation. ) Since 2018, post-money SAFEs have made it easier for founders and investors to quickly and reliably close deals with confidence. Moreover, the convertible note has several clauses: Interest rate = 5%, which adds to the principal amount (investment) Discount rate = 20%. Jun 24, 2020 · Our SAFE and convertible note calculator will help you understand the potential dilutive impact of pre-money SAFEs, post-money SAFEs (aka YC SAFEs), and notes once they convert in a future priced round. If the founders and investors can’t agree on a pre-money valuation and there is still investment interest, the founders might issue convertible notes to investors. 5 million in new money, the It is assumed that existing convertible notes will convert into the same type of security offered in the financing. Model multiple Notes or Safes and a priced round to account for all anticipated fundraising activity between now and the completion of a future priced round. Aug 13, 2019 · In this example the pre-money valuation is 6,300,000 which together with the investment of 2,251,200 and the valuation placed on the convertible notes of 134,400 gives a post-money valuation of 8,685,600. Scenario 2: $5m Pre-money Valuation Cap, No Conversion Discount. View pre and post-money dilution before and after a future priced round, visualizing your ownership at multiple future valuations. 00/share ($5. dtdbohabklftmynunpqwangklcjaiowcwebqpwjetljqqpjhzsrkyqbhtryeeeanot