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The basic concept for valuing a convertible note is the same in theory as the valuation of any other financial asset. 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.
Simply multiply the convertible note's interest rate by the number of years that have passed since the convertible note was issued. In this case, we would multiply 6% by 5 to get an accrued interest of 30%.
Post money valuation = Pre money + investment To calculate how much the Series-A VC has, you divide $2m/$10m (investment over the post-money), implying 20% ownership post financing. If you hadn't raised a convertible notes, then math is simple.
Convertible notes are usually structured as a single agreement called the note purchasing agreement. This covers all of the financing terms. Promissory notes are then issued to individual investors with the date and amount of their investment.
Convertible debt is a debt hybrid product with an embedded option that allows the holder to convert the debt into equity in the future. The ratio is calculated by dividing the convertible security's par value by the conversion price of equity.