If you don't know who owns what percent of your business, then you cannot accurately assess how much money each shareholder has invested into the company or how much equity they have earned by being involved with you. In addition, it can help pinpoint any dilution (a decrease in your ownership stake) that occurs during the life of the company. It is important to have a cap table because it helps to manage and track ownership stakes.Ī cap table is a tool for investors to keep track of their stakes, and for entrepreneurs to keep track of their investors. How is a cap table constructed?Ī cap table is a detailed list of all shareholders and their respective ownership stakes. The cap table, except for the founder shares, will break down each type of ownership in the company such as common shares, preferred shares, restricted shares, and unvested shares. In this case, her founder equity would be equal to 100% on your cap table since she's the only owner/founder. She owns 100% of it and has no partners or investors. The cap table is responsible for keeping track of the amounts and types of each type of ownership in your company.įor example, let's say that Jane makes up all the equity in your company. What are the different sections of a cap table?Īs you can see, there are a lot of different types of equity. In addition to being an easy-to-digest snapshot that shows you how much ownership each person has in your business (and gives you a foundation for future conversations about compensation), it also helps with decisions like whether or not to take on additional investment. It represents, in one document, who owns what percentage of the company and how much equity each owner has contributed to getting it there. The cap table is one of the most important documents for an early-stage startup. Why should I care about my company’s cap table?īecause it's a record of all the capitalization of your company. Vesting terms for employee stock options or restricted stock units (RSUs), such as cliff vesting periods and graded vesting schedules. The price per share that was paid for each share and when it was purchased (and at what valuation or share price) The number of outstanding shares and their types (common or preferred) The cap table is a legal document that outlines how much money has been invested in your startup, who owns what percentage of your company, and what rights they have. The phrase "cap table" comes from "capitalization table," but it's just easier to say "cap table." What is a cap table?Ī cap table is a term used in the startup world to describe a document that lists all of the investors, their ownership stake in the company (also known as their equity), and what their rights are. Let's jump right into the most important document a business has. By Lior_Ronen | Founder, Finro Financial ConsultingĪ cap table, or capitalization table, is a document that is crucial to running a successful business.īut what's a cap table? Why should you care about your company's cap table? How is it constructed, and what information can you find in one? What should you do before you raise money?
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