A cap table, short for “capitalization table,” is a document or spreadsheet that details the equity ownership capital structure of a company. It outlines who owns what portions of the company’s shares, and it reflects each investor’s percentage of ownership, value of equity in each round of investment, and the dilution of shares through successive rounds of financing.
A standard cap table includes the following information:
- Shareholder Names: A list of all the shareholders of the company, which could include founders, investors, employees with stock options, and other equity holders.
- Number of Shares Owned: The total number of shares each shareholder owns, including common and preferred stock.
- Percentage of Ownership: The proportion of the company that each shareholder owns, based on the number of shares held relative to the total number of shares outstanding.
- Type of Equity: This indicates whether the shares are common stock typically held by founders and employees, preferred stock typically held by investors, or other types of equity like warrants or convertible notes.
- Price Paid per Share: How much each shareholder paid for their shares, often organized by the round of funding (e.g., Series A, Series B).
- Total Paid-in Capital: The total amount of money shareholders have invested in the company.
- Option Pools: Information about shares reserved for current and future employees under stock option plans.
- Vesting Schedules: Details on how and when stock options for employees vest and become exercisable.
- Rights and Preferences: This includes information about any special rights, such as voting rights or preferences on dividends and liquidation for preferred stockholders.
- Conversion Prices or Ratios: For convertible securities, such as convertible notes or convertible preferred stock, the conditions under which they convert into common stock and the rates of conversion.
- Anti-Dilution Provisions: Details on any protections investors have against dilution in future financing rounds.
The cap table is a dynamic tool that evolves with the company’s growth and funding stages. It is essential for financial decision-making and for negotiations during fundraising as it helps illustrate potential ownership changes due to new investment. Additionally, during exit scenarios such as a sale or IPO, the cap table is crucial for understanding the distribution of proceeds among shareholders. Proper management of the cap table is critical to ensure accuracy and to prevent disputes over ownership.