Convertible Note & Cap Table Math Guide for Indiana

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 Indiana calculator helps you model how a convertible note turns into equity and what that does to a cap table—including the impact of interest and time-to-conversion, plus common conversion mechanics like discounts and valuation caps.

Because convertible notes can be structured in many ways, this tool is built around practical, repeatable math:

• Convert a note balance (principal + accrued interest, if included) into shares
• Apply either:

  • a valuation cap, a discount, or both (depending on the note terms you input)
• Compute the new ownership percentages after conversion
• Show outcomes under different scenarios (e.g., different conversion dates)

In short, the calculator turns your note terms into a share count and then recalculates ownership across investors, option pools, and any other pre-existing equity (based on the inputs you provide).

When to use it

Use DocketMath’s convertible note cap table calculator when you need defensible numbers for any of the following:

• You’re negotiating a priced equity round and need to estimate conversion outcomes (e.g., “If we close on Oct 15, what percent will the note holders own?”).
• A note includes a valuation cap and/or discount and you want to compare alternative conversion formulas.
• Interest accrues and you want to avoid manual spreadsheet errors around timing.
• Multiple notes exist (often with different issue dates, principal amounts, and conversion terms).
• You’re preparing investor materials where ownership percentages must be consistent across drafts.

Also, if your workflow touches legal filings around note maturity, default, or enforcement timing, be aware that Indiana generally uses a 5-year statute of limitations for certain actions on contracts.

A quick Indiana timing anchor

Indiana Code § 35-41-4-2 provides a 5-year limitations period (with an exception referenced as “V3” in the statute’s structure). You’ll see this often cited in discussions of when certain claims must be brought.

• Indiana Code § 35-41-4-2 — 5 years
  Source: https://law.justia.com/codes/indiana/2022/title-35/article-41/chapter-4/section-35-41-4-2/
• Sub-rule cited in the provided data: 5 years — exception V3

Step-by-step example

Below is a detailed walk-through that mirrors how convertible note conversions are typically modeled. The exact fields in DocketMath depend on the calculator configuration, but the math logic is the same.

Example assumptions (you can swap these)

We’ll model a single convertible note converting into a priced round.

Company pre-round

• Pre-money valuation (from the priced round): $5,000,000
• Pre-round fully diluted shares (before conversion): 10,000,000 shares

Financing terms

• Note principal: $250,000
• Annual interest rate: 8%
• Note issue date: Jan 1, 2025
• Conversion date (round closing): Jul 1, 2026
• Day count simplification used for illustration: 18 months of accrual

Conversion terms

• Valuation cap: $4,000,000
• Discount: 20%
• Convert “at the better price” (common approach when both cap and discount exist)

No option pool expansion and no additional new investors in this worked example.

Step 1: Compute time-based interest

Interest accrues on principal from issue date to conversion date.

• Principal: $250,000
• Annual interest: 8%
• Time: 18 months = 1.5 years

Accrued interest:

• $250,000 × 0.08 × 1.5 = $30,000

Total amount converting (principal + interest):

• $250,000 + $30,000 = $280,000

Tip: If your note excludes interest from conversion (some notes do, or they handle interest differently), set “include interest” accordingly in the inputs. The share outcome can change materially.

Step 2: Determine the “conversion price” based on cap/discount

First compute the priced-round share price implied by pre-money valuation.

Assume the priced round price per share is:

• $5,000,000 / 10,000,000 shares = $0.50 per share

Now evaluate the cap-based and discount-based conversion prices.

Valuation cap method

With a cap of $4,000,000, the implied price is:

• $4,000,000 / 10,000,000 shares = $0.40 per share

Discount method

With a 20% discount to the round price:

• $0.50 × (1 − 0.20) = $0.40 per share

Choose better outcome

Here both methods produce the same conversion price ($0.40). In many real deals, the “better” price means the lower per-share price.

Conversion price used: $0.40 per share

Step 3: Convert the note into shares

Shares issued to note holders:

• $280,000 / $0.40 = 700,000 shares

So, after conversion:

• New total shares = pre-round shares + converted shares
• 10,000,000 + 700,000 = 10,700,000 shares

Step 4: Calculate ownership percentage impact

Ownership % for the note holder:

• 700,000 / 10,700,000 = 6.54%

If you have other equityholders in the model, the calculator will apply the same dilution math across the cap table.

Step 5: Run a timing sensitivity check

Try the same inputs with a different conversion date:

• If the conversion date is 3 months earlier (15 months instead of 18), interest drops by:

  • $250,000 × 0.08 × 0.25 = $5,000
• Total converting amount becomes $275,000
• Shares:

  • $275,000 / $0.40 = 687,500 shares
• Ownership becomes slightly lower because dilution changes.

This is exactly why modeling matters: small timing changes can shift ownership by fractions of a percent, which compounds across multiple notes.

Common scenarios

Convertible notes rarely convert under one “single universal” formula. Instead, cap tables get complicated based on note terms and financing structure. Here are practical scenarios to model in DocketMath.

1) Cap + discount, with “most favorable” selection

Many notes convert using the lower price between cap-derived and discount-derived prices.

Checkbox idea for your modeling workflow

2) Interest inclusion vs. exclusion

Some agreements include accrued interest in the conversion amount; others treat interest differently.

Checklist

3) Multiple notes with different issue dates

If you have several notes, each one may accrue interest differently and may have different caps/discounts.

A common error is applying one “average interest” to all notes. Instead:

4) Conversion into an equity round vs. standalone conversion

Some notes convert upon a qualified financing at the round price (using cap/discount rules). Others may convert upon company election or automatic conversion at maturity.

Math-wise, this changes:

• the “conversion price” anchor (round price vs. alternative valuation)
• potentially whether interest stops accruing at conversion trigger

5) Option pool and fully diluted share definitions

Because cap table math depends on the denominator, you need clarity on:

• whether “pre-money shares” is fully diluted already
• whether options/RSUs are included before conversion
• whether the option pool is created before or after the conversion event

Tips for accuracy

You’ll get the most reliable output from DocketMath if you treat your inputs like they’re part of a controlled accounting process—consistency matters more than perfect assumptions.

1) Lock your conversion date and accrual method

Choose a consistent rule for interest accrual:

• If DocketMath uses simplified month-based accrual, use that same approach across scenarios.
• If you’re running “what-if” comparisons, change only one variable at a time (e.g., conversion date while holding all other inputs steady).

2) Use cap/discount math in the correct order

If your note says “apply discount to the capped price” (or vice versa), the result changes. Your calculator workflow should match the note language you input.

3) Keep valuation definitions consistent

Valuation caps should be applied to the correct valuation base. Make sure your conversion formula uses:

• pre-money valuation (not post-money)
• the same share base used to compute implied price per share

4) Model dilution in one place

A frequent spreadsheet error: you compute share counts in one file, then recompute ownership elsewhere with a slightly different share total. Instead:

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 California — Full how-to guide with jurisdiction-specific rules