Convertible Note & Cap Table Math Guide for New York

What this calculator does

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

DocketMath’s Convertible Note & Cap Table Math tool helps you model how a convertible promissory note converts into equity and how that conversion affects a New York cap table (i.e., ownership percentages before and after the note converts).

You can use it to calculate, from the inputs you provide:

• Conversion price based on a valuation cap and/or discount (depending on the note terms you enter)
• Number of shares issued upon conversion (including the impact of any option pool or reserved shares you include in your model)
• New ownership percentages for:

  • the noteholders (post-conversion)
  • existing equity holders (dilution from the conversion)
• Fully diluted share count and resulting percent ownership changes

Because math tools don’t do legal interpretation, this guide focuses on the calculation mechanics—the “how the percentages and share counts move” when you change terms.

Primary CTA: /tools/convertible-note-cap-table

When to use it

Use DocketMath for convertible note and cap table math when any of these events are on the calendar:

• You’re preparing a board package or investor update showing post-conversion ownership outcomes
• You’re negotiating note terms (cap vs. discount vs. both) and want to compare resulting dilution
• You’re modeling multiple notes (e.g., two rounds of notes with different caps/discounts)
• You’re reconciling cap table inconsistencies before a financing closes
• You’re estimating downstream ownership impact for:

  • option grants
  • investor pro rata rights
  • future rounds where conversion is triggered

New York context (what the statute does and doesn’t cover)

The jurisdiction provided includes a general statute-of-limitations data point: 5 years. The cited provision—N.Y. Crim. Proc. Law § 30.10(2)(c)—sets a general default period in the cited criminal procedure context.

• General SOL Period used in this guide: 5 years
• Source: https://www.nysenate.gov/legislation/laws/CPL/30.10
• Clarification: No claim-type-specific sub-rule was found for this citation; this guide therefore treats the 5-year period as the general/default period tied to the provided source.

Step-by-step example

Below is a concrete example you can mirror directly in DocketMath.

Example note terms and cap table inputs

Assume the company has:

• Pre-money shares outstanding (fully diluted before conversion): 10,000,000
• Option pool reserved in fully diluted count: 0 (you can change this in the calculator)
• Convertible note principal: $1,000,000
• Valuation cap: $8,000,000
• Discount: 20%
• Next financing (assumed conversion trigger price): $1.50 per share
• Number of shares reserved/issued via other instruments: 0 (for simplicity)

Step 1: Determine conversion price from cap and discount

Many convertible notes compute conversion price by choosing the better (lower) price implied by the valuation cap and the discount.

Let’s compute both:

A. Cap-implied price
Valuation cap divided by fully diluted post-money share basis (how that “basis” is handled depends on the note’s definition). For this example, we’ll align the model to the calculator’s typical approach: using the conversion basis as the “share base” used to translate valuation into a per-share price.

• Cap-implied share price = $8,000,000 / 10,000,000 = $0.80 per share

B. Discount-implied price

• Discounted price = $1.50 × (1 − 0.20) = $1.50 × 0.80 = $1.20 per share

Choose the lower price (better for the noteholder):

• Conversion price = min($0.80, $1.20) = $0.80 per share

Step 2: Compute shares issued on conversion

• Shares issued = $1,000,000 / $0.80 = 1,250,000 shares

Step 3: Compute new fully diluted share count

Starting shares: 10,000,000
Add conversion shares: + 1,250,000
New post-conversion fully diluted shares: 11,250,000

Step 4: Compute ownership percentages

• Noteholder ownership = 1,250,000 / 11,250,000 = 11.11%
• Existing holders ownership = 10,000,000 / 11,250,000 = 88.89%

Step 5: See how changing inputs affects dilution

Try the same scenario with one change at a time:

• Increase valuation cap from $8M → $10M

  • cap-implied price rises, conversion price likely rises, dilution likely decreases.
• Increase discount from 20% → 30%

  • discounted price falls, conversion price likely falls, dilution likely increases.
• Assume next financing price rises from $1.50 → $2.50

  • discount-implied price rises, but cap-implied price stays constant; outcomes depend on which is lower.

DocketMath is designed so you can quickly rerun these “what if” comparisons without manually recomputing the full dilution chain.

Common scenarios

Convertible notes aren’t one-size-fits-all. Here are common patterns you can model with the calculator by adjusting inputs.

1) Cap-only notes vs. discount-only notes

Use:

• Cap-only model: enter a valuation cap and set discount to 0%
• Discount-only model: enter discount and set valuation cap to a value that won’t bind (or set it to 0 if your note definition supports that input method)

Typical output shifts:

• Cap-only: outcome is more sensitive to cap than to the next financing price (depending on how your terms convert)
• Discount-only: outcome is more sensitive to next financing price

2) Cap + discount together (most negotiated)

Most “cap + discount” notes convert using the more favorable price.

What you’ll typically see in the tool:

• If next financing is expensive, the cap may dominate
• If next financing is relatively cheap, the discount may dominate
• The switch point occurs when the cap-implied price equals the discount-implied price

3) Multiple convertible notes with different terms

When you enter multiple notes, your cap table effects stack:

• Each note conversion increases the denominator (fully diluted shares)
• Later note conversion effects depend on how the calculator sequences the conversion basis

A practical workflow:

• Model one note first to see baseline dilution
• Add notes one at a time to isolate incremental dilution

4) Option pool handling (reserved vs. already included)

Cap tables often treat option pools differently:

• If your “fully diluted shares before conversion” already includes reserved options, you must avoid double-counting
• If the pool is not included, add it as reserved shares so dilution is accurate after conversion

In the tool, this typically shows up as:

• Higher pre-conversion share base → different implied per-share cap price and different post-conversion percentages (depending on how the model aligns to your note’s basis)

5) Trigger timing and scenario selection

Some notes convert only when a trigger occurs (e.g., a qualified financing). Even without getting into legal interpretation, you can still model the economic effect under multiple scenarios:

• Scenario A: conversion at a lower priced financing
• Scenario B: conversion at a higher priced financing
• Compare outcomes in terms of:

  • conversion price
  • shares issued
  • noteholder ownership percentage

Tips for accuracy

A few disciplined practices make the output dramatically more reliable.

Use consistent share basis and “fully diluted” definitions

Before you enter numbers, decide what your share base represents.

Checklist:

Confirm how the calculator interprets valuation cap math

Valuation caps can be implemented using different denominators depending on the note language (e.g., pre-money vs. post-money, inclusion/exclusion of reserved options). Even if you don’t change the tool’s internal method, you can improve accuracy by aligning your inputs:

• Use the share count that best matches the note’s conversion basis
• Adjust reserved shares so the implied per-share cap price matches what your spreadsheet would produce under the note’s method

Validate with a sanity check table

Run a quick comparison before relying on results.

Keep term units consistent

Common data-entry errors:

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