Every Question Answered about Cap Table Management
Cap Table Management

If the company were a movie, the Cap Table would be the credits at the start and the end as to who had what part in the film. We have spoken about Cap Table quite a lot, but we still feel it is less than what we can talk about. Today, we are attempting to answer all the questions that you might have about Cap Table.

What is a Cap Table?

A Cap Table or a Capitalization table is a spreadsheet or a table or a graph showing the breakdown of the ownership of the organization into all the securities, shares, warrants, convertible notes, ESOP Pool, financial participation, etc. It is very useful for startups right from the early stage in understanding who the major stakeholders, investors, etc., are and what their stakes are in the company. Overall, it is a tool for entrepreneurs to understand how their finances are, especially to understand the pre and post-financing scenarios.

Do Cap Tables only record transactions and the ownership?

No, Cap Tables also comprise legal documents like stock issuances, transfers, cancellations, conversion of debt to equity, etc., and any other relevant documents about the ownership since the inception of the company. In its simplest form at the beginning of a company, a cap table lists the shareholders at the beginning and their respective share ownership.

How should you structure a Cap table? Or How to make a Cap table?

Companies normally use spreadsheets to make Cap tables at the inception, but it becomes difficult to maintain once the dilution and funding rounds start. Either way, Cap Tables should ideally capture the information about- One, what the share percentage is, and second what the share of ownership is:

Section 1: Comprising the number of shares the company is allowed to issue, it has issues, ESOP pool share, etc.

  • Authorized shares
  • Outstanding shares
  • Unissued Shares
  • Shares reserved for the stock option plan or commonly called the ESOP Pool

Section 2: Shareholder details and the percentage of ownership they have

  • Shareholder names
  • Shares owned by each shareholder (%)
  • Stock options of each shareholder
  • Fully diluted shares
  • Options remaining

What comprises a good Cap Table?

Simple, it must convey all the possible information about the shareholders very easily and effectively. For example, take a look at the image below, it shows how Cap Table looks with Vega Equity.

It conveys all the information, in a simple graphic format and also shows the % of dilution according to the rounds. An ideal cap table should consist of information about :

  • % with the investors
  • % of ESOP Pool
  • Who are all the stakeholders

What is Cap Table Management?

Cap Table management is the process of maintaining and updating the Cap Table. It is to ensure that all transactions are accounted for and the data is updated, and registered after each transaction. This is to ensure that potential investors are easily able to see the equity structure during funding rounds and founders can make well-informed decisions.

What is the best software for Cap Table Management?

There is quite a few software in the market, like trica, Qapita, Carta, etc. We would suggest Vega Equity as one of the best software for Cap Table Management as it provides a simple, accurate, and comprehensive view to harness the regulatory, and investor data, for Cap Table reporting and disclosure through a secure platform.

Example of a Cap Table or Cap table Free template

For early-stage startups, or those looking to have a spreadsheet-based Cap Table management, here’s a free template for your download. If you want to have something more suitable for your needs, contact us today. We offer Zero Subscription Charges for 30 ESOP Employees and the first 2 years from the Incorporation Date for startups.

How to use a Cap Table?

One of the key uses of a Cap Table is to see how some decisions impact the equity dilution of the company. Take expansion or reduction of ESOP Pool, New investment or funding rounds, etc., and see how it affects the company dilution. In short. Cap table can be used for:

  • Discuss Equity distribution
  • Managing Employee options
  • Term sheet negotiation
  • Equity dilution scenario Management

What do Investors look for in a Cap Table?

Investors would look at the following aspects to understand how the ownership of your company is distributed and what the funding raised is:

  • The money the company has raised ( and its share of Equity and Debt Financing)
  • Amount of Equity the company holds ( and the share into authorized, outstanding, ESOP pool, etc.)
  • Previous rounds of investment and the subsequent dilution
  • The projection for future rounds of investment

Why use Cap table management software over excel?

In easy words, because you have a reliable source of information and it allows you to scale as you grow with the company. Secondly, managing Cap Table with Cap Table Management software is far more efficient than managing it with spreadsheets. It removes the ambiguity and human errors that occur while dealing with spreadsheets. Plus, accessibility and sharing become a nightmare while using spreadsheets. In case you want to have the best Cap table management software on the market, schedule a demo with us!

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