What a Convertible Note Does to Your Equity Before a Priced Round

A convertible-note announcement can look like a valuation, but it postpones the ownership decision. Until the conversion price, discount, cap, and trigger are known, treat your stake as a range, not a number. Cylake disclosed a $245 million convertible note on September 8, 2026. The financing brought Cylake's total raised capital to $290 million, after a $45 million seed round led by Greylock Partners in March 2026. The note was 84.5% of that total and 5.4 times the seed.

A convertible note gives a startup cash now and lets the investor decide shares later. The investor usually converts when the company raises a priced round, hits a milestone, or reaches a maturity date. Until that trigger fires, the note is a promise to buy equity, not a share count on the cap table, the company's ownership list. A large note can make the company look well funded, but it does not tell you how much of the company the investor will own. The same cash can become a small stake at a high conversion price or a larger stake at a low price, a discount, or a cap. Your ownership is only fixed when the conversion terms are applied. The question for a founder or employee is how many shares the note will create when it converts.

Cylake's note shows why terms matter

Lightspeed Venture Partners led the round, with Picture Capital and Redpoint Ventures participating. Cylake said it expected a beta product by the end of 2026 and full general availability in 2027. A note can arrive before beta, so the conversion trigger may be a later priced round rather than current revenue.

The four terms that turn cash into shares

When you review a note, ask for the terms that convert a cash amount into a share count.

• Conversion price: the per-share price used when the note converts. A lower price gives the investor more shares for the same cash.
• Discount: a percentage off the next round's price. It increases the investor's share count and can increase dilution for existing holders.
• Cap: a ceiling on the valuation used for conversion. If the next round is priced above the cap, the investor converts as if the company were worth less.
• Conversion trigger: the event that forces conversion, such as a priced round, a milestone, or maturity.

Those terms can point in different directions. A high discount can increase dilution even if the cap is high. A low cap can increase dilution even if the next round is large. A priced-round trigger waits for that round, while a milestone trigger can make timing less predictable.

Model your stake as a range, not a single number

Start with the note's cash amount and the possible conversion prices. If the note converts at a low price, at a discount to the next round, or at a cap, each path gives a different share count. Divide the note's cash by each conversion price to see how many shares the investor could receive.

Add those shares to the existing share count, then divide your shares by the new total. That gives your post-conversion percentage. Do it for the best case, the base case, and the worst case. The spread is the price of holding equity in a company that uses deferred pricing.

Nebius's offering shows the same logic in a public-company setting. Before pricing, Nebius's convertible note offering had not yet set the notes' ownership terms. After pricing, the $5.0 billion offering had two series. The 2030 series had an initial conversion price of $313.46 per share, and the 2034 series had $324.65 per share. Those prices were about 40% and 45% above the $223.90 closing price. At those initial conversion prices, conversion could create about 15.7 million new Class A shares. At the initial conversion prices, the notes could add about 15.7 million Class A shares, or roughly a 6% increase over the 271.9 million shares outstanding at June's end, if the stock gains at least 40%.

Run the same math on your startup. Show the assumptions, and revisit the math as the details become clear. If a term is missing, leave the estimate open.