Convertible Note & Cap Table Math Guide for Virginia

What this calculator does

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

DocketMath’s Convertible Note & Cap Table Math Guide (US-VA) calculator helps you model how a convertible note converts into equity and how that conversion affects a cap table in Virginia startup fundraising scenarios.

Specifically, it calculates the ownership outcomes for:

• The note investor converting their principal (and, if applicable, accrued interest)
• Existing shareholders and their post-conversion percentages
• New common stock / preferred stock issuance implied by the conversion
• Price per share and conversion shares using common convertible note terms

It’s designed to turn the terms you already have—like valuation cap, discount, and note amount—into a share count you can map onto a cap table.

When to use it

Use DocketMath when you need to answer “what happens if…?” questions that typically arise during fundraising and capitalization planning in Virginia (and elsewhere in the U.S.).

Common times this comes up:

• You’re closing a priced equity round and need to convert an outstanding note quickly.
• You’re negotiating note terms (cap vs. discount) and want to see how each changes ownership.
• You’re preparing a cap table update for investors, boards, or future financings.
• You’re reconciling multiple notes (different caps, discounts, and maturity interest) and want a consistent calculation approach.

A good rule of thumb: if your agreement includes (1) a valuation cap, (2) a discount, or (3) interest that converts, you’ll benefit from using a calculator rather than trying to do it by hand under time pressure.

Typical inputs that drive outcomes

Most convertible note math boils down to:

• Note principal (e.g., $500,000)
• Accrued interest (if you model conversion of interest)
• Valuation cap (e.g., $6,000,000)
• Discount rate (e.g., 20%)
• Equity round price per share (or post-money valuation and share count)
• Existing shares outstanding (or fully diluted shares basis, depending on your agreement)
• Whether conversion uses cap, discount, or the “lower”/“more favorable” mechanism (as stated in the note)

Step-by-step example

Below is a concrete example you can replicate in DocketMath. The numbers are chosen to show how the cap and discount interact.

Scenario

A Virginia startup has a convertible note with these terms:

• Note principal: $500,000
• Interest: 6% simple per year, accrued through the next priced round (assume 1 year for illustration)

  • Accrued interest modeled for conversion: $500,000 × 6% = $30,000
• Total conversion amount (principal + modeled interest): $530,000
• Valuation cap: $6,000,000
• Discount rate: 20%
• Priced round: Series Seed

  • Priced round valuation used for share price: $10,000,000 post-money
  • Existing fully diluted shares before the round: 5,000,000
  • New investment makes the post-money match the stated valuation

To compute conversion shares, we need a price per share for the round.

Step 1: Derive round price per share

Assume:

• Post-money valuation = $10,000,000
• Post-money shares = existing fully diluted + new shares from the priced round

Let’s pick a consistent share math basis:

1. Suppose the new round issues 1,000,000 new shares.
2. Then post-money shares = 5,000,000 + 1,000,000 = 6,000,000
3. Implied price per share = $10,000,000 / 6,000,000 = $1.6666667

You’d enter your actual share/price inputs in DocketMath. If your agreement uses a different definition of share count basis, align the calculator inputs to that definition.

Step 2: Compute the cap-based conversion price

Cap-based conversion price generally uses:

• Cap value ÷ post-money shares at the time of conversion

Using the same post-money shares assumption (6,000,000):

• Cap-based implied price = $6,000,000 / 6,000,000 = $1.00 per share

Step 3: Compute the discount-based conversion price

Discount-based conversion price typically uses:

• **Round price per share × (1 − discount)

• Discount price = $1.6666667 × (1 − 0.20) = $1.6666667 × 0.80 = $1.3333333

Step 4: Choose the conversion price (cap vs. discount)

Many convertible notes convert at the more favorable price to the noteholder (commonly meaning the lower per-share price, because that yields more shares). If your note uses that “lower price wins” concept:

• Cap price: $1.00
• Discount price: $1.3333333
  ✅ More favorable (lower) = $1.00

So, conversion price = $1.00 per share.

Step 5: Convert the note amount into shares

Conversion shares = conversion amount ÷ conversion price

• Conversion amount = $530,000
• Conversion price = $1.00/share
  ✅ Conversion shares = $530,000 / $1.00 = 530,000 shares

Step 6: Update cap table percentages

Now compare before and after share counts.

Using our prior post-money share count:

• Round post-money shares (before note conversion) = 6,000,000
• Add note conversion shares = 530,000
• New fully diluted shares after conversion = 6,000,000 + 530,000 = 6,530,000

Investor ownership from the note conversion:

• Note holder % = 530,000 / 6,530,000 = 8.1136% (approx.)

Existing shareholders / new equity holders:

• Everything else combined = 100% − 8.1136% = 91.8864%

If you enter specific existing shareholder breakdowns in DocketMath (instead of “aggregate existing shares”), the tool will produce each party’s post-conversion percentage.

Common scenarios

Convertible notes don’t all behave the same way. Here are frequent variations you can model accurately with a consistent inputs checklist.

1) Cap only vs. discount only

If the note has only a valuation cap:

• Your conversion price comes from the cap math.
• Discount won’t be applied in DocketMath (leave discount blank or set to 0% depending on tool design).

If the note has only a discount:

• Your conversion price comes from the round price × (1 − discount).

2) “Lower of cap-based price and discount-based price”

This is the most common “mechanism” language. Model both and select the lower per-share price for the investor.

3) Multiple notes converting in the same round

If you have:

• Note A with cap $6M, discount 20%, $500k principal
• Note B with cap $4M, discount 25%, $300k principal

…then DocketMath should compute conversion shares per note and add them into the post-conversion fully diluted share count.

Checklist for multi-note modeling:

4) Whether accrued interest converts

Some notes convert only principal; others include interest. In the example above, we converted principal + 1 year of simple interest.

If you switch off “interest converts” in DocketMath:

• Conversion amount decreases
• Conversion shares decrease
• Investor ownership decreases proportionally

5) Different “round price” definitions

Agreements sometimes use:

• price per share from a financing
• implied price based on a valuation cap/amount
• or a mechanism based on whether the round qualifies

Model consistency is key:

• If you use post-money valuation / post-money shares to infer price, keep that basis consistent with your cap-based math.

6) Partial conversions / amendments

Some deals involve amendments where:

• the note converts only up to a portion
• or changes cap/discount for future conversion

DocketMath can still help if the effective terms for the conversion are clearly represented in inputs—just don’t treat amended terms as if they applied retroactively unless the amendment says so.

Tips for accuracy

The best modeling workflow is the one that prevents definition mismatches. Here are practical ways to keep DocketMath outputs reliable.

1) Use one share-count basis end-to-end

A calculator can only be as correct as your inputs. Before you compute:

• Identify whether your agreement uses:

  • pre-money shares
  • post-money shares
  • fully diluted shares
• Apply that exact definition to:

  • round price derivation
  • cap-based conversion price calculation
  • post-conversion dilution math

2) Make cap math consistent with the calculator’s price-per-share approach

Cap-based conversion is often implemented like:

• Cap value ÷ post-money shares = implied conversion price

If your agreement uses a different mapping (for example, cap translates to a cap on valuation without the same shares basis), the calculator must match that.

3) Decide how to treat interest before entering it

If the tool supports “interest converts,” input the correct accrual assumptions:

• Accrual start date (or “time from issuance” depending on

Sources and references

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

• Va. Code Ann. § 8.01-382

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