What Is It 🤷♂️
A cap table is essentially a spreadsheet that outlines the ownership of shares among shareholders of a company. It contains information such as the number of issued shares and the percentage of those shares owned by each shareholder. In addition to this, it will also show other details about those investors such as their names and contact information. This information can be kept up-to-date with every round of funding or changes in ownership structure.
Why Should You Care 🤔
Cap tables are important because they give founders visibility into who has ownership rights over their company’s stock. They help founders understand who has voting rights and representational rights on critical decisions made within the company. Additionally, cap tables can help founders when it comes time to issue dividends or other kinds of bonuses to investors or employees based on their stake in the company. By providing visibility into ownership structures and percentages, cap tables help ensure that everyone receives accurate compensation for their contributions to the business.
How Do You Make One? 🤓
Creating a cap table is not an overly complicated process if you’re excel savvy, but there are some key steps you should take to ensure accuracy:
1) Start by gathering all relevant data about your current shareholders including name, contact information, number of shares owned, and percentage of total shares they own
2) Input this data into your spreadsheet
3) Calculate each shareholder’s percentage of total shares owned
4) Update your spreadsheet after each round of financing or ownership change
5) Keep your cap table up-to-date with any new investments or changes in ownership structure.
6) Share your cap table with investors if needed for transparency purposes.
7) Use software like Carta or Eqvista to manage your cap table as your company matures (although these services come at a cost).
8) Check with an attorney specializing in corporate law to make sure you have everything set up correctly.
Parting Words 🙏
By staying organized, keeping detailed records, and creating accurate spreadsheets with up-to-date numbers, founders can easily use cap tables to make informed decisions when it comes time for equity-based decisions. With proper management and oversight through regular maintenance checks, founders will be able to keep track of equity ownership more efficiently while ensuring that everyone gets compensated accurately for their investments including themselves.
