There shouldn't be any "magic" to this. It's stock standard:

1. Set the conversion cap
2. Give them follow on rights should you need another round (you never know)
3. No anti-dillution
4. No liquidation multiple, just preference
5. 7% interest rate

That's as fair as fair can be. Don't reinvent the wheel.

Also consider a YC safe note. Downloadable and usable straight out the box.

If you're taking money from an accelerator they have a template. Yes, if they really want you you can negotiate, but they have a template, right?
The only way to know for sure is to read the whole note.

I work in corporate finance and venture funding and have experience with multiple convertible notes, SAFEs and early-stage equity deals for founders and investors.

Answer:
What you’re describing can be a fair structure – but only if the details are right and truly founder-friendly. With a recognised accelerator/industry expert it’s normal that they use a standard convertible note, but you’re right to be cautious.

Here are the key things I’d check as a founder:

1. Conversion mechanics if there’s no new round

Because you may not raise another round before an exit, you need very clear rules for:
• What counts as a conversion event (next equity round, sale of the company, or a long-stop date).
• How the price is set if there is no priced round (e.g. a valuation cap or a pre-agreed formula).
• What happens at an exit before conversion – do they get a multiple on the note, a discount on the exit price, or just their money back?

Without this, the note can sit on your cap table in a very grey area and create arguments exactly at the moment you want things to be clean (exit).

2. “Fully diluted” and ownership percentage

You are absolutely right to insist that:
• all options, warrants and all outstanding notes
• any ESOP you are planning
• and any other commitments

are included in the fully-diluted cap table used to calculate their percentage.

Ask them for a simple cap-table example: “If we sell for $30M and your note converts, what % will you own, and what will each founder own?” If they can’t show this on one page, it’s a red flag.

3. Rights and investor protections

What you describe – ordinary shares with “light-touch” protections, standard pre-emption on future rounds and tag-along rights – is pretty standard and can be reasonable if:
• there are no heavy veto rights on day-to-day operations
• no “hidden” liquidation preference or guaranteed minimum return
• no anti-dilution beyond a normal pro-rata right
• no right to block a reasonable exit

You want them aligned with you on value creation, not in a position to paralyse the company.

4. Is the equity you’re giving away proportionate to the value?

Because you are paying partly with equity for expertise / network, ask yourself:
• How much time and hands-on support will they really give?
• Are there clear expectations on intros, strategic work, board involvement?
• Is the effective equity cost (after conversion) in line with that value?

If this note ends up being, say, 5–10% of the company post-conversion and they genuinely move the needle (access to key partners, follow-on investors, credibility), that can be a good trade. If it drifts higher with vague commitments, it’s not.

5. Use truly founder-friendly docs

“Standardised founder-friendly documentation” is good – but only if your own lawyer confirms that. At minimum, I’d want:
• clear, short note terms (cap/discount, maturity, interest, triggers)
• standard shareholder protections, nothing exotic
• a clean clause on what happens at an early exit

This is not legal advice, and you should absolutely have a startup lawyer review the actual documents before signing. But from what you’ve written, the structure sounds broadly reasonable – it just needs to be nailed down in proper, precise language.

If anyone needs help with this, I’m happy to walk through your draft term sheet or cap table and sanity-check the economics with you in more detail on a call.