Convertible note cap table math in Maine

Founders in Maine often use convertible notes to close early money without pricing the round. That’s fast for fundraising—but it pushes complexity into the future, especially when you need to model dilution before a priced equity round.

This guide walks through how to model convertible note cap table math in Maine using the DocketMath Convertible Note Cap Table calculator, with a focus on:

• What inputs you need
• How the math works (step‑by‑step)
• Where Maine corporate law can matter
• Common modeling pitfalls to avoid

Use it as a modeling guide, not as legal advice.

Quick takeaways

• Convertible notes change your Maine cap table mostly at the first priced equity round, not when you sign them.
• The core drivers of dilution are:

  • Pre‑money valuation
  • Discount and valuation cap on each note
  • Interest rate and time outstanding
  • Whether notes convert pre‑ or post‑money relative to the option pool
• Maine law (especially if you’re a Maine corporation) can affect:

  • How many shares are authorized and issued
  • Board and shareholder approvals for new stock
  • How you document and track conversions
    But the core math (discounts, caps, interest) is largely deal‑driven, not state‑specific.
• DocketMath’s /tools/convertible-note-cap-table lets you:

  • Enter all notes, terms, and round details
  • See share counts and ownership percentages
  • Test “what‑if” scenarios (different valuations, caps, or pool sizes)

Inputs you need

Before opening the calculator, gather these details. The more precise you are, the more reliable your Maine cap table model will be.

Use this intake checklist as your baseline for Convertible Note Cap Table work in Maine.

• note principal balance
• valuation cap
• discount rate
• pre-money valuation
• round size and option pool
• conversion timing

If any of these inputs are uncertain, document the assumption before you run the tool.

1. Company and share structure

You’ll need:

• Type of entity

  • Maine corporation (often a C‑corp)
  • Maine LLC that has issued units and is converting to a corporation

• Authorized vs. issued shares

  • Total authorized common stock
  • Shares already issued to:

    • Founders
    • Employees
    • Early advisors

• Existing option pool

  • Current pool size (number of options reserved)
  • Options already granted vs. still available

These inputs determine the baseline ownership before any notes convert.

2. Each convertible note’s terms

For each note (or SAFE‑like instrument, if you’re modeling it similarly), collect:

• Principal amount (e.g., $100,000)
• Issue date (to calculate accrued interest)
• Interest rate (e.g., 5% simple annual interest)
• Discount rate (if any, e.g., 20%)
• Valuation cap (if any, e.g., $5,000,000)
• Conversion mechanics

  • Converts in an equity financing of at least $X?
  • Converts into preferred or shadow preferred?
  • Any most‑favored‑nation (MFN) clauses?
• Conversion at pre‑money or post‑money?
  This is usually defined by the note and the equity round documents, but you need to know how to model it.

You’ll enter these into DocketMath as separate instruments so you can see the impact of each note.

3. New equity round details

For the priced round that triggers conversion (often a Seed or Series A):

• Pre‑money valuation (e.g., $8,000,000)
• New money being raised (e.g., $3,000,000)
• Price per share (or the inputs to compute it)
• Target option pool size after the round
  (e.g., “we want a 15% post‑money pool”)

You’ll also need to set:

• Whether the option pool is sized pre‑ or post‑money relative to:

  • New investors
  • Converting notes

This choice can meaningfully affect founder dilution.

4. Maine‑specific context

DocketMath’s math is jurisdiction‑aware, but you should still confirm:

• Governing law in your note documents
  Many Maine startups incorporate in Delaware; check what your note actually says.
• Corporate approvals required under Maine law
  (board/shareholder approvals, amendments to the articles to increase authorized stock, etc.)
• Securities compliance
  Maine has its own securities (blue sky) rules; compliance doesn’t change the math, but it may affect timing or structure.

How the calculation works

Below is the logic that DocketMath applies when you run a convertible note cap table scenario for a Maine company. The sequence matters.

DocketMath applies the Maine rule set to the inputs, then runs the calculation in ordered steps. It validates the trigger date, applies rate or cap logic, and produces a breakdown you can audit. If you change any one variable, the tool recalculates the downstream outputs immediately.

1. Compute accrued interest on each note

For each note:

1. Determine the accrual period
   From issue date to the conversion date (usually the closing date of the equity round).

2. Apply the interest rate

   • Most startup notes use simple interest, not compounding.
   • Formula (simple interest):

   Accrued Interest = Principal × Rate × (Days Outstanding / 365)
   

3. Compute total conversion amount:

   Conversion Amount = Principal + Accrued Interest
   

DocketMath does this automatically once you give it dates and the rate.

2. Determine the base price per share of the new round

For the new preferred round:

1. Start with pre‑money valuation (ignoring notes).

2. Decide what’s in the pre‑money share count:

   • Existing common
   • Existing options
   • Any other convertible securities that are contractually treated as pre‑money

3. Compute price per share:

   Price per Share = Pre‑Money Valuation / Pre‑Money Fully Diluted Shares
   

This is the standard investor price before discounts or caps.

3. Apply discount and valuation cap for each note

Each note converts at the better (lower) price from:

• Discounted price

  Discounted Price = Investor Price × (1 – Discount Rate)
  

• Cap price

  The cap is converted into a per‑share price using the same share base used for the pre‑money valuation:

  Cap Price = Valuation Cap / Cap Share Base
  

  The “Cap Share Base” should follow your deal documents. Common patterns:

  • Same as the pre‑money fully diluted shares
  • Or pre‑money shares excluding the new option pool expansion

DocketMath lets you specify how the cap is applied so your Maine model matches your documents.

For each note:

Conversion Price = min(Discounted Price, Cap Price)  (if both exist)
Conversion Price = Discounted Price                  (if no cap)
Conversion Price = Cap Price                         (if no discount)

4. Convert each note into shares

Once you know:

• Conversion Amount (principal + interest)
• Conversion Price (from step 3)

DocketMath calculates:

Note Shares = Conversion Amount / Conversion Price

These shares are then added to the cap table, usually as a class of preferred (or shadow preferred) defined by the round terms.

5. Size the option pool (pre‑ or post‑money)

This step is often the most confusing—and the most dilutive for founders.

You choose in DocketMath:

• Pre‑money pool expansion
  The pool is increased before new investors and notes, so founders bear more dilution.
• Post‑money pool expansion
  Everyone (founders, notes, new investors) shares the dilution.

Example logic for a target post‑money pool percent:

Target Pool % = Pool Shares / (Total Post‑Money Shares)

DocketMath solves for Pool Shares that achieves the target percentage, taking into account:

• Founders and existing holders
• Converting notes
• New investors
• Existing pool

6. Add new investors and compute final ownership

Finally, DocketMath:

1. Uses the investor price per share (from step 2).

2. Divides new cash invested by that price:

   New Investor Shares = New Money / Investor Price
   

3. Builds the post‑money share table, including:

   • Founders and existing common
   • Converting note holders
   • Preferred investors in the new round
   • Option pool (granted and ungranted)

You end up with:

• Share counts by holder
• Percentage ownership by holder and class
• Implied post‑money valuation and fully diluted shares

This is what you’ll see in the DocketMath output when you run a Maine scenario with the /tools/convertible-note-cap-table tool.

Common pitfalls

Convertible note math is conceptually the same in Maine as elsewhere in the U.S., but local practice and documentation can introduce twists. Here are issues we see repeatedly when teams model by hand.

• confusing pre-money and post-money caps
• forgetting to apply the discount versus cap test
• ignoring existing option pool dilution
• mixing share class terms

1. Ignoring accrued interest

• Many founders model only the principal, forgetting the interest.
• Over several years, interest can be a material percentage of the round.

To avoid this, always confirm:

• The interest rate in each note
• Whether interest is simple or compounding
• Whether interest actually converts or is paid in cash (some notes allow either)

2. Mis‑applying valuation caps

Two frequent mistakes:

• Using the wrong share base for the cap (for example, forgetting to include the option pool when the documents say you must)
• Treating the cap as if it were a guaranteed valuation rather than a maximum valuation for the note holder’s conversion price

Carefully read each note’s cap

Sources and references

Start with the primary authority for Maine and confirm the effective date before relying on any output. If the rule has been amended, update the inputs and rerun the calculation.

• 14 M.R.S. § 1602

Capture the source for each input so another team member can verify the same result quickly.

Next steps

Run the Convertible Note Cap Table calculator now and save the inputs alongside the result so the workflow is repeatable. You can start directly in DocketMath: Open the calculator.

If an assumption is uncertain, document it alongside the calculation so the result can be re-run later.

Related reading

• Interest rule lens: Maine

• How to calculate deadlines in Delaware

• Worked example: interest in Maine

• Why we started the DocketMath blog

• Why we started the DocketMath blog