Convertible Note & Cap Table Math Guide for Illinois

What this calculator does

Run this scenario in DocketMath using the Convertible Note Cap Table calculator.

DocketMath’s Convertible Note & Cap Table Math Guide for Illinois is built around one practical task: turning a convertible note’s terms into cap table-ready outcomes—so you can model how ownership changes when the note converts.

Specifically, the convertible-note-cap-table calculator helps you compute:

• Conversion price based on a valuation cap (and/or discount, if those terms are included in your note).
• Conversion amount (the number of shares the note converts into) using the note principal and the conversion price.
• Post-conversion cap table (who owns what) by applying dilution to existing shareholders.
• Fully diluted share counts under the conversion scenario you enter.

Because your goal is math that’s consistent with your documents, the calculator’s accuracy depends on the inputs you provide. Treat the output as modeling (a math tool), not legal characterization.

Illinois timing context (limitations period)

If your question connects to disputes (for example, missed conversion mechanics, valuation cap interpretation, or fraud-related claims), Illinois uses a general limitations period of 5 years under 720 ILCS 5/3-6.

As a clear limitation of this guide: the Illinois statute cited here is the general/default rule. It is not claim-type-specific mapping in this content (no claim-type-specific sub-rule was found for a more granular SOL breakdown).

Source: https://ilga.gov/ftp/Public%20Acts/101/101-0130.htm?utm_source=openai

When to use it

Use the DocketMath convertible-note-cap-table tool when you need to translate note terms into ownership math for a realistic scenario.

Good use cases

• You’re closing a convertible note round and want to sanity-check dilution before signing.
• You’re preparing an investor update that includes “what happens on conversion.”
• You’re comparing two conversion outcomes, such as:

  • conversion under a valuation cap,
  • conversion using a discount,
  • conversion at a priced round conversion mechanism.
• You’re reconciling documents: term sheet → note → conversion mechanics → cap table output.

Planning moments involving timing (Illinois)

If you’re dealing with potential conversion disputes, keep in mind the 5-year general limitations period appears in 720 ILCS 5/3-6.

• General SOL: 5 years
• Statutory citation: 720 ILCS 5/3-6
• Characterization in this guide: default/general rule, not mapped here to specific claim categories.

Step-by-step example

Below is a concrete example you can mirror in DocketMath. Once the structure works, you can reuse it for different caps, discounts, or share counts.

Example scenario (valuation cap + conversion)

Assume an Illinois startup has:

• Pre-money shares outstanding (existing common): 10,000,000
• Convertible note principal: $1,000,000
• Valuation cap: $8,000,000
• Discount: 0% (for simplicity)
• Note converts using a valuation-cap-based conversion price (cap-based conversion)
• Fully diluted share assumption for conversion: use the calculator’s standard approach based on the inputs you enter so the “implied share basis” is internally consistent.

Because cap-based conversion typically converts using a price per share derived from the valuation cap, you generally need an assumption for the implied share count behind the cap. In many models, that means you either:

• enter “fully diluted shares” in a way that matches your note’s concept of the denominator, or
• ensure the tool uses a consistent shared basis across its conversion price and dilution calculations.

Step 1: Enter cap table starting point

In DocketMath, start with:

• Existing shares: 10,000,000

Step 2: Enter convertible note terms

Enter:

• Note principal: 1,000,000
• Valuation cap: 8,000,000
• Discount: 0% (or leave blank if your note is cap-only)
• Conversion mechanism: choose the option that matches your note language (cap-based conversion)

Step 3: Compute conversion price / implied share math

The tool derives a conversion price from the cap valuation and the share basis your inputs imply. Then:

• Conversion shares = note principal ÷ conversion price

Step 4: Apply dilution to the post-conversion cap table

Finally, DocketMath applies the conversion shares:

• Post-conversion shares = existing shares + conversion shares
• Ownership %:

  • existing holders: existing shares ÷ post-conversion shares
  • note holder: conversion shares ÷ post-conversion shares

Illustrative result (example numbers)

If the calculator’s inputs imply a conversion price of $0.80/share, then:

• Conversion shares = $1,000,000 ÷ $0.80 = 1,250,000 shares
• Post-conversion shares = 10,000,000 + 1,250,000 = 11,250,000 shares
• Note holder ownership = 1,250,000 ÷ 11,250,000 = 11.11%
• Existing holders combined ownership = 10,000,000 ÷ 11,250,000 = 88.89%

Important: Your exact conversion shares depend on the implied share basis your note assumes and the tool’s corresponding settings. The calculator’s goal is internal coherence—so if you provide consistent inputs, the dilution math stays consistent too.

Common scenarios

Convertible notes don’t convert in one universal way. Use the calculator to compare outcomes across scenarios that investors and founders commonly model.

1) Valuation cap only

If your note uses only a valuation cap, the cap drives the conversion price (discount doesn’t apply).

Model goal: determine how many shares the note becomes at the cap-based price.

2) Discount only

If your note uses a discount to a future trigger price (and no cap), the effective conversion price is typically:

• conversion price = trigger price × (1 − discount)

Model goal: estimate dilution relative to the trigger price.

3) Cap + discount (most favorable to the note holder)

Many notes use the more favorable of:

• cap-based conversion price, or
• discount-based conversion price.

DocketMath supports comparing the two and using the defined rule you select.

4) Multiple notes converting together

If more than one convertible note converts in the same event:

• convert each note,
• sum the conversion shares,
• then compute ownership percentages based on the combined total.

If your tool supports multiple notes directly, use that workflow. If not, you can run separate scenarios and combine conversion shares manually—just ensure the shared “implied share basis” and settings are consistent across runs.

5) Changes in outstanding shares (including options)

If your model includes option pool shares, reserved shares, or “fully diluted” denominators, the conversion price translation can change.

Model goal: keep the implied share count consistent with the valuation method your note expects. Using one run’s “fully diluted” denominator and another run’s “issued and outstanding” denominator can produce different results even if the cap number matches.

Tips for accuracy

These checks prevent most convertible note cap-table modeling errors.

Input checklist (use before you trust the output)

• Existing shares: confirm whether you’re using issued and outstanding or fully diluted (or another definition) for the share basis.
• Valuation cap: confirm it’s the correct cap amount (and how it applies—e.g., “up to” language or specific conversion mechanics).
• Discount: enter as a true percentage (for example, 20% rather than 0.2) depending on what the tool expects.
• Conversion trigger / mechanism: ensure the calculator’s conversion setting matches your note’s actual conversion logic (cap vs. discount vs. priced-round mechanism).
• Principal vs. other components: confirm the amount that converts is the note principal (not interest-only or another component—unless your note clearly states otherwise).
• Rounding: if your documents specify rounding (whole shares vs. fractions), verify whether the tool rounds in the same way.

Timing context (Illinois)

If you use the model output in a dispute timeline or claim-planning narrative, remember the general Illinois 5-year SOL cited in this guide:

• General: 5 years
• Statute: 720 ILCS 5/3-6
• Scope note: this is the general/default limitations period, not a claim-type-specific breakdown in this content.

Consistency test (fast sanity check)

Before exporting or sharing results, run these quick checks:

• If the cap increases, the conversion price usually goes up, so conversion shares go down.
• If the principal increases, conversion shares go up linearly.
• If the discount increases (more favorable to the note holder), conversion shares should generally increase.

If a run behaves opposite to these expectations, stop and re-check:

• your conversion mechanism selection,
• your cap/discount inputs,
• and the share basis used for the implied conversion price.

Use DocketMath as the “math engine”

Once your inputs match your note agreement, use the tool as a repeatable workflow:

• run Scenario A (cap-only),
• run Scenario B (cap + discount, most favorable),
• run Scenario C (priced round mechanism, if applicable),
• compare dilution and ownership side by side.

You can then present results clearly to stakeholders without repeatedly re-deriving the math.

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Related reading

• Inputs you need for convertible note cap table math in United States (Federal) — Input checklist with sourcing guidance
• Worked example: convertible note cap table math in North Carolina — Worked example with real statute citations
• Convertible note cap table math in New Hampshire — Full how-to guide with jurisdiction-specific rules