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 Minnesota is built around a single job: helping you model how a convertible note transforms into equity and how that conversion affects a company’s cap table (ownership percentages, dilution, and option-like outcomes created by conversion terms).

Specifically, the calculator (template: convertible-note-cap-table, jurisdiction: US-MN) is designed to compute conversion results using the core deal terms you input, including scenarios like:

• Discount conversion (holders convert at a reduced price vs. a later priced round)
• Valuation cap conversion (holders convert as if the company were valued at or capped at a specified amount)
• Both discount and cap (the calculator applies the “better for the holder” result depending on the modeled structure)
• Automatic conversion on a future priced round (when you specify a target financing)
• Conversion at maturity (when you specify a conversion price or another triggering assumption)

Because conversion outcomes are arithmetic, small input changes (like conversion price, cap, or discount) can swing results dramatically. This guide focuses on the math so you can sanity-check the output.

When to use it

Use this calculator and guide when you need repeatable cap table math for convertible note outcomes—especially when you’re preparing for a financing, investor update, or internal governance review.

Common times teams run this type of modeling include:

• Before issuing a convertible note

  • You want to understand how the note will dilute existing holders once it converts.
• During a seed/Series A process

  • You expect a priced round soon and want to test how discount/cap terms affect conversion.
• When you receive an investor term sheet

  • You need to evaluate tradeoffs between valuation cap vs. discount for different stakeholder outcomes.
• When negotiating revisions

  • If the cap or discount changes, you can quickly rerun the cap table impact.

One caution: timelines for enforcement and filings sometimes connect to conversion/collection strategies, and Minnesota has specific statutory limits for certain criminal record contexts (not conversion mechanics). For example, Minnesota generally sets a 3-year period for certain gross-misdemeanor court record availability matters under Minnesota Statutes § 628.26. That 3-year timing is unrelated to note conversion pricing, but it can matter in broader diligence workflows and compliance timelines.

Step-by-step example

Below is a concrete example you can mirror in DocketMath’s convertible-note-cap-table tool. The goal is to show how inputs map to outputs, and how each term changes the result.

Example deal assumptions (one note)

Company + existing capitalization

• Pre-money shares (existing, before conversion): 1,000,000 shares
• Option pool (already reserved/shares outstanding assumption): 100,000 shares

  • For this example, we’ll treat these as part of the existing fully diluted baseline. (If your cap table treats them differently, the math will shift—rerun using the tool’s modeling inputs.)

Convertible note terms

• Principal amount: $500,000
• Discount: 20%
• Valuation cap: $6,000,000
• Note converts on a priced equity round at:

  • New money raise: $1,000,000
  • Pre-money valuation used for discount math: $10,000,000
  • Therefore priced round share price is derived from valuation.

Priced round math inputs

1. **Implied pre-money share price (priced round) If fully diluted shares are 1,100,000 (1,000,000 + 100,000):

   • Share price = $10,000,000 / 1,100,000 = $9.0909 per share (approx.)

2. Discount conversion price

   • Discount price = $9.0909 × (1 − 0.20) = $7.2727 per share

3. **Cap conversion price (cap sets an effective valuation)

   • Cap implies an effective valuation of $6,000,000
   • Cap-based share price = $6,000,000 / 1,100,000 = $5.4545 per share

4. Select the better price for the holder Most standard cap+discount structures convert at the more favorable (lower) conversion price:

   • Compare: $7.2727 (discount) vs. $5.4545 (cap)
   • Chosen conversion price = $5.4545 per share

Convert the note into shares

• Note principal: $500,000
• Conversion shares = $500,000 / $5.4545 = 91,666.67 shares (approx.)

Round to your policy (often the tool outputs fractional shares or rounds to a whole share depending on configuration).

So after conversion:

• Existing shares: 1,100,000
• Added note shares: 91,667
• Total shares after conversion: 1,191,667

Ownership outcomes (post-conversion)

This is the core outcome your cap table needs to show.

Common scenarios

Convertible note modeling rarely stays “one clean case.” Here are frequent scenarios and how the math shifts in DocketMath.

1) Discount-only notes

If there is no valuation cap, the conversion price usually equals the discounted priced-round share price.

• Key effect: note holder gets shares based on discounted price.
• Cap table outcome: dilution depends primarily on your priced round valuation and the discount percentage.

Checklist for inputs:

2) Cap-only notes

If there is no discount, the cap sets the effective conversion valuation.

• Key effect: note holder can convert as if the company were valued at the cap.
• Cap table outcome: in high-valuation rounds, cap becomes the dominant lever.

Checklist:

3) Cap + discount (choose the better price)

Many notes use both, and conversion price is the better of:

• discounted price vs.

• cap-based price

• Key effect: the cap often dominates in higher priced rounds; discount can dominate when the priced round valuation is near or below cap mechanics.

• Cap table outcome: note conversion shares are typically lower price → more shares → more dilution.

Checklist:

4) Conversion at maturity (no priced round yet)

If you’re modeling what happens when the note matures and converts without a new financing, the calculator must rely on:

• a maturity conversion price, or

• a maturity conversion formula (depending on what you input)

• Key effect: without a priced round, you often need a direct conversion price assumption.

• Cap table outcome: dilution becomes sensitive to whatever conversion price you model at maturity.

5) Multiple notes and stacked instruments

Real cap tables include multiple convertibles, SAFEs-like instruments, warrants, and prior preferred equity.

• Key effect: each instrument converts into shares; later conversions dilute earlier ones.
• Cap table outcome: total dilution is additive, but percent ownership is not linear because the denominator grows.

Checklist:

6) Option pool and “fully diluted” conventions

Even if the note math is correct, misalignment on what “fully diluted shares” includes can create large errors.

Examples:

• Inclusion/exclusion of option pool

• Treatment of reserved but unissued options

• Treatment of equity grants pre-round

• Key effect: conversion price uses the share denominator.

• Cap table outcome: note conversion share count changes proportionally with the denominator.

Tips for accuracy

Small modeling choices can produce outsized differences. Use these guardrails when running DocketMath.

Use consistent denominators

Your conversion share count depends on the share count used to derive conversion price.

Quick checks:

Verify unit conversions and rounding

Typical sources of error:

• Discount applied as 20 instead of 0.20
• Valuation cap treated as a per-share cap instead of total company valuation
• Share rounding causing 1–2% ownership drift in edge cases

Recommended approach:

Sanity-check with directionality

Before trusting a number, check the direction:

• If you increase the valuation cap, note conversion should generally result in fewer shares (higher conversion

Sources and references

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

• Minn. Stat. § 322B.13

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