How to interpret convertible note cap table math results in North Carolina

What each output means

When you run a North Carolina–focused scenario through the DocketMath convertible note cap table calculator, you’ll see outputs that describe who owns what after a priced round, and how each note converts.

Here’s how to read the most common outputs in that context.

1. Post-money valuation and price per share

Post-money valuation
The company’s valuation after the new equity financing closes, including all the new money and the converted notes.

• In a typical NC seed or Series A, this is the negotiated number in the term sheet.
• The calculator shows how that headline valuation interacts with the notes’ discounts and caps.

Price per share
The price investors in the new round pay for each share of preferred stock.

• Typically:
  Post-money valuation ÷ (Fully diluted shares after the round)
• Notes often convert at an effective price per share that’s lower than this, based on:

  • Discount (e.g., 20% off)
  • Valuation cap (e.g., $6M cap vs $10M round valuation)

Price per share drives how many shares each stakeholder ends up with.

2. Effective conversion price for each note

For each convertible note, DocketMath shows an effective conversion price—the actual price per share used to convert that note into equity.

For a typical North Carolina startup using standard convertible notes:

• Discount method:
  Conversion price = New money price × (1 − discount rate)
• Cap method:
  Conversion price = Valuation cap ÷ Fully diluted capitalization (as defined in the note)

The calculator compares these and applies the more favorable one to the noteholder, if the note is drafted that way (which is common).

Why it matters:

• A lower conversion price means the noteholder gets more shares for the same principal.
• This directly affects founder dilution and investor ownership.

3. Shares issued on conversion

Each note’s “shares issued” result shows how many shares the note converts into at closing.

Behind the scenes, the math is typically:

(Principal + accrued interest, if applicable) ÷ effective conversion price

Key things to watch:

• Interest: If the note accrues interest, that extra amount also converts, increasing the share count.
• Rounding: Documents often specify rounding to the nearest whole share; DocketMath uses a consistent rounding approach so the totals add up.

In North Carolina deals, this number is central to understanding whether a founder still has a controlling stake after the financing.

4. Ownership percentages post-financing

You’ll usually see a post-financing cap table that includes:

• Founders/common stock
• Option pool (existing and/or expanded)
• New money investors (e.g., Series Seed/Series A)
• Each convertible note (now as preferred or common, depending on your inputs)

The ownership % for each group is:

Shares owned ÷ Total fully diluted shares after the round

This is often the first thing NC founders and investors look at:

• Does the founding team remain above 50%?
• Does the lead investor hit their target percentage (e.g., 15–20%)?
• Are early noteholders overly concentrated?

5. Option pool size and impact

If you include an option pool increase in the calculator, you’ll see:

• **Total pool size (shares and %)
• How much of that pool is effectively borne by:

  • Founders
  • Noteholders
  • New investors

In many North Carolina financings, the term sheet specifies a pool size “on a pre-money basis”. The calculator shows how that plays out numerically and who absorbs the dilution.

6. Fully diluted share count

The fully diluted share count is the denominator for nearly all the percentages you see. It usually includes:

• All issued common stock
• All preferred stock (existing and new)
• All options and warrants (including the unallocated option pool)
• All shares issuable on conversion of notes

This number is critical because even small changes here can shift ownership percentages meaningfully.

What changes the result most

The calculator is sensitive to several inputs. Changing any of these can move ownership percentages a lot, especially in early-stage North Carolina companies with modest valuations.

These inputs have the biggest impact on the final number. Adjust them one at a time if you need a sensitivity check.

• cap versus discount outcome
• round size
• option pool adjustments

1. Valuation caps vs. round valuation

The biggest lever is the relationship between each note’s valuation cap and the priced round valuation.

• If the round valuation is higher than the cap, the cap usually controls.
• A lower cap → lower conversion price → more shares for that noteholder → more dilution for everyone else.

For example, if you change a note’s cap from $10M to $5M, you’ll see:

• That note’s shares jump
• Founder and other investor percentages drop

2. Discount rate

The discount is another powerful driver:

• A 10% vs 25% discount can create a large spread in conversion price.
• Higher discount → lower conversion price → more shares to that noteholder.

If your NC note stack includes multiple discounts and caps, DocketMath helps you see which term (cap or discount) is actually binding at the modeled round valuation.

3. Note principal and accrued interest

Two related levers:

• Principal: Larger note amounts convert into more shares at the same price.
• Interest: If the note accrues and converts interest, the conversion amount grows over time.

In the calculator, increasing a note’s principal or interest rate will:

• Increase that noteholder’s shares
• Reduce everyone else’s percentage

4. Option pool size and whether it’s pre- or post-money

A change from, say, a 10% to a 20% option pool is a major dilution event.

Key modeling choices that move the needle:

• Pre-money pool: Founders and existing holders (including notes) bear more of the dilution.
• Post-money pool: New investors share more of the dilution.

DocketMath lets you toggle these assumptions so you can see which structure aligns with your goals and the term sheet on the table.

5. New money amount and valuation

Two related but distinct inputs:

• New money raised:

  • More dollars at the same valuation → more shares for new investors → more dilution to existing holders.
• Pre- or post-money valuation:

  • Higher valuation (for the same amount raised) → fewer shares to new investors → less dilution.

In North Carolina seed rounds (where valuations can vary widely), these inputs often decide whether founders stay above or fall below key control thresholds (like 50%).

Next steps

You can use the DocketMath convertible note cap table calculator as a “what-if” engine for your North Carolina scenario. A practical workflow:

1. Map your instruments

   • List each note: principal, interest rate, cap, discount, maturity.
   • Identify any SAFEs or other convertibles and their terms.
   • Note any existing option pool and outstanding options.

2. Enter a baseline scenario

   • Input your target pre- or post-money valuation.
   • Add the total new money you expect to raise.
   • Set an initial option pool target (e.g., 10–15%).

3. Stress-test key levers

   • Lower and raise the valuation to see when caps “turn on.”
   • Change the option pool size and pre-/post-money treatment.
   • Adjust note caps or discounts to see how sensitive founder ownership is.

4. Check for red flags

   • Does any single noteholder end up with an unexpectedly large stake?
   • Do founders retain the level of control they’re aiming for?
   • Are new investors hitting their target ownership?

5. Align with your legal documents

   • Compare the calculator assumptions to your actual note and stock documents.
   • Flag any differences (e.g., unusual definitions of “fully diluted capitalization”).
   • Discuss your modeled scenarios with North Carolina counsel and your lead investor.

You can start experimenting with your own numbers here:
**Primary tool: DocketMath convertible note cap table calculator

Using the tool iteratively—before you sign a term sheet—can make negotiations more concrete. You can point to specific modeled outcomes instead of debating in the abstract.

Related reading

• Why we started the DocketMath blog

• Introducing Explain++: step-by-step calculation breakdowns

• Why we started the DocketMath blog

• Why we started the DocketMath blog