Convertible Note Valuation Model
Community
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Calculate the expected value of a convertible note investment given uncertainty in the next round's valuation, the valuation cap, and the discount rate.
NOTEAbout This Model
## Calculate the expected value of a convertible note investment given uncertainty in the next round's valuation, the valuation cap, and the discount rate. This model explores how **Note Value At Conversion** could play out, depending on Next Round Valuation, Cap, Discount. Hit **Run** to see the range of possibilities.
VARIABLENext Round Valuation
triangular(1.0e+6, 5.5e+6, 1.0e+7)
The pre-money valuation of the next qualified financing round. Startups often target 2x-5x growth from seed.
next_round_valuation
VARIABLEDiscount
beta(4, 16)
Standard market discounts for convertible notes typically range from 10% to 30%.
discount
VARIABLECap
triangular(5.0e+6, 1.0e+7, 1.5e+7)
The maximum valuation at which the note converts. This protects the investor from high valuations.
cap
FORMULADiscounted Valuation
next_round_valuation * (1 - discount)
The valuation at which the note converts based on the discount rate.
discounted_valuation
FORMULAEffective Conversion Valuation
min(cap, discounted_valuation)
The effective valuation for conversion is the lower of the valuation cap or the discounted valuation.
effective_conversion_valuation
FORMULAOwnership Stake
100000 / effective_conversion_valuation
The percentage of the company the note holder receives upon conversion.
ownership_stake
FORMULANote Value At Conversion
ownership_stake * next_round_valuation
The dollar value of the ownership stake at the next round valuation.
note_value_at_conversion
OUTPUTNote Value At Conversion
note_value_at_conversion
Track the note value at conversion output
What is Carlo?
Carlo is a visual tool for Monte Carlo simulation. Model uncertainty by dragging probability distributions, connecting them visually, and running thousands of scenarios instantly.