Why Convertible Notes Need Dilution Modeling
Convertible notes are the most common seed-stage investment vehicle, yet most founders
and angels can't easily visualize how caps and discounts affect ownership. Here's why
manual modeling matters:
The 20% discount trap: A typical 20% discount might seem small, but paired with
a $5M cap, an angel investing $500K could end up with 2-3x more shares than expected.
Example scenario:
- Angel invests $500K with 20% discount, $5M cap
- Series A at $8M pre-money, $8/share
- Discount price: $6.40/share
- Cap price: $5/share (since $5M / 625K shares = $8, but cap overrides)
- Conversion shares: ~$560K / $5 = 112K shares vs 70K at no cap
- That's 60% more equity than a straight investment!
What you get in the template:
- Pre-built Google Sheet with 3 tabs
- Automatic interest accrual
- Three conversion scenarios calculated instantly
- Full dilution impact on founder ownership
Grab the full template here to run your own scenarios: [link]
MicroTools Studio builds practical financial tools for independent investors and startups.
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