After modeling a financing round with our tool (here), you may want to translate that data into a new cap table. This will allow you to input shares and record conversions from convertible notes to see how it would change the cap table. You can also run various scenarios, such as a Waterfall on the copy.
Here’s an example of cap table dilution prior to modeling out the data:
Below is a screenshot of our Financing Round scenario tool. As you can see, this is assuming a pre-money valuation of $3M and $1M of new money.
This results in a new round share price of $3 per share. This means that any new money being invested will be done so at $3 per share.
However, the example cap table above included convertible securities (notes). Since these can have conversion caps and discounts, the price per share they convert to is different (our article on this can be found here):
Each convertible security has a different price per share. This is due to the varying conversation caps, despite the principal note amounts being the same.
To get started you’ll want to make a copy of your cap table and open that in a new window. If you don’t know how to do this, you can go here for some help: How to Create a Version of your Cap Table
NOTE: Make sure the changes being made are to a copy, and not your primary cap table. The top search bar will indicate which version is being used.
Step 1: If your notes won’t be converting to common, you’ll want to create a new security class that they can convert in to. That can be done under Security Classes > Summary > Actions > New Security Class.
NOTE: If you’ll be running a Waterfall after modeling this, the security details like original issue price are extremely important.
Step 2: In the new copy you’ll want to record the conversion to equity. Instructions on recording conversions can be found here (or multiple notes at once here). Be sure to copy the exact amounts from the financing round tool data.
NOTE: If you don’t want to check invested capital or ownership percentage changes for note holders, you can skip the conversions and record a single preferred issuance for new shares under the next step.
Step 3: After you’ve recorded the conversions to equity, be sure to record the new preferred stock from the new money investment under Primary Issuances (if you skipped the individual conversions, be sure to add the new shares for the notes also):
That’s it! You can now do things such as run a waterfall scenario or check dilution. Here’s an example of how the dilution changed, using the above scenario: