Cap Table Startup Template + Calculation Example

They’re analyzing your efficiency, control structure, and the math behind future returns. By the time you reach Series B, the conversation shifts from potential to performance. He has a track record of exits and Unicorns, and is backed by 1400+ LPs. After that, the key components, terms and finally a Complete Exercise. After experiencing a COVID-19 related dip in Q deal count, Q3 showed signs of improvement. As you can see from the figure below, the deal sizes have trended up pre-COVID despite the drop is deal count.

Poor maintenance of the cap table structure creates obstacles that can prevent completing the deal. A well-maintained cap table provides owners and investors with their correct share when their company moves toward an initial public offering (IPO) or gets acquired. A startup requires a cap table to understand how much ownership each funding contributor receives after raising capital.

In practice, we’ve found that accurately tracking this potential dilution helps both founders and investors understand the long-term effects on equity distribution. It details who owns what, how much they own, and the value of their ownership at any given time. This document is important for startups and growing companies as it helps manage equity accounts, anticipate potential dilution from future investments, and make informed decisions about fundraising rounds.

How is Sention revolutionizing battery management systems (BMS) with advanced diagnostics, ML and AI?

This calculates how much each shareholder class receives in a liquidity event, factoring in aspects like liquidation preferences, participation rights, and seniority stacking across multiple rounds. At this stage, the cap table reflects a fully capitalization table vc example built company – multiple investor classes, a fully allocated option pool, perhaps even secondary sales or structured liquidity for early shareholders. Late-stage investors often negotiate their own rights, which may be more protective than earlier rounds. Their ownership percentage drops, not just because of the new investors, but also due to the expanded option pool. If you raised on SAFEs or notes earlier, those instruments also convert now, adding to the total share count and further impacting founder equity.

Map out who you plan to hire before the next round, how much equity each will likely need, and how compensation will be structured. It’s a negotiation move, and it can cost founders 5–10% of their company in a single line item. Series A is where your cap table either graduates to institutional grade or gets expelled. And that story starts with proving you understand the difference between giving away equity and investing it wisely. Moreover, while the vast majority of VCs exit their investments through acquisitions, the dollar amounts of these exits are derived largely from IPOs, and more recently, from acquisitions.

Investors often scrutinize cap tables to evaluate the financial health and distribution of equity before committing resources. Learn more about the intricacies of investment rounds in this guide to understanding term sheets. In addition to Excel templates, many digital platforms provide comprehensive solutions for managing cap tables. These software tools often come equipped with advanced features, such as automated regulatory compliance, real-time collaboration among stakeholders, and detailed analytics for tracking equity trends.

• There’s no need for a full table because if one investor owns 100 shares, they have the same ownership and economic value as 100 shares owned by any other investor.
• In conclusion, a cap table serves as a comprehensive ledger for all forms of equity in a company, tracking changes from the company’s founding to the present.
• Let’s delve into some strategies to ensure your cap table remains a trustworthy source of information throughout your company’s growth journey.
• For more insights, check out this comprehensive guide on understanding cap tables.

How VCs Stress-Test a Cap Table by Scenario Modeling

A Capitalization Table, or Cap Table, is a record of a company’s shareholders and their holdings from inception to the present. It is essential in private companies as it shows the breakdown of equity capitalization, ownership, and the company’s valuation throughout its life. Most companies use spreadsheets to create a cap table at the inception of the business. The cap table should be designed in a simple and organized layout that clearly shows who owns certain shares and the number of outstanding shares. The most common structure is to list the names of investors/security owners on the Y-axis, while the type of securities is listed on the X-axis.

Capitalization (Cap) Table: What It Is and How to Create and Maintain One

As you raise more money and grow your team, the cap table tracks every change – new investors, updated share classes, exercised options, and evolving ownership percentages. Dilution typically happens when new shares are issued, consequently reducing the percentage ownership of existing shareholders. By analyzing the cap table, shareholders can anticipate how future financing events, stock option grants, or conversions of convertible securities might dilute their stakes. New investors entering the company while growth occurs cause equity dilution. A proper tracking system for changes proves essential to business operations.

Best Practices for Cap Table Updates and Communication

• Startups employ software tools like Carta, Eqvista and Pulley to automate cap table management, thus reducing errors and assuring transparency.
• Such capital acquisition enables companies to hire more staff while developing new products and growing their operations which converts dilution into a strategic component that has value.
• When new investments occur, the first step in updating your cap table is correctly calculating the new shares to be issued.
• The structure and complexity of a cap table grow over time, mirroring the company’s journey.
• This highlights the importance of diligent cap table maintenance, which can be streamlined with the aid of cap table management software.

The term “pro-forma”, derived from Latin, means “as a matter of form” or “for the sake of form”. In a business context, it’s used to portray hypothetical scenarios or forecasts. While a standard cap table gives us a glimpse of a company’s existing equity ownership, startups often experience a dynamic and shifting financial landscape.

Incorporating Employee Stock Options (ESOPs) into Cap Tables

This capitalization table (cap table) template is a helpful tool for a startup company or early-stage venture to list all the company’s securities. By tracking these instruments accurately, companies can prepare for potential dilution, maintain transparency with shareholders, and avoid unexpected shifts in ownership when the notes or SAFEs convert to equity. Whether you’re a founder preparing for your first funding round or an investor evaluating potential deals, understanding cap tables is crucial for making informed decisions about equity, dilution, and control.

If the cap tables are not updated continuously, the company or its employees may end up paying more taxes than they need to. If the company submitted fewer taxes than required, they may end up paying high penalties for mistakes that they could have avoided. The cap table typically indicates the accounting ownership of individual shareholders, which is the actual ownership percentage. Accounting ownership varies from economic ownership, which is the percentage of ownership available to equity.

Tools like Carta offer free cap table management for startups with up to 25 stakeholders and $1M raised. These platforms automate updates, reducing the need for manual intervention and minimizing errors. We’ve put together a hands-on, founder-grade template that lets you apply everything you’ve just learned. It’s built from actual fundraising scenarios, shaped by term sheet mechanics and real-world cap table data.

The Macabacus template offers a comprehensive solution for VC returns analysis, providing accurate projections of investor gains and funding outcomes. With its structured cap table example Excel, startups and investors can effectively manage equity ownership, track dilution, and make informed financing decisions. Additionally, the venture capital financial model template integrates return calculations with long-term financial planning, ensuring clarity in deal structuring and investment strategies. By leveraging these tools, both startups and venture capitalists can optimize decision-making, reduce errors, and enhance financial transparency, leading to smarter and more successful investments. A cap table is essential for a private company and a critical tool in the VC Process. Company management is responsible for maintaining an up-to-date record of the equity ownership in its company.

Whether you’re raising your first round or prepping for Series C, this guide breaks down exactly what you need to know. To master the art of Excel, check out CFI’s Excel Crash Course, which teaches you how to become an Excel power user. Learn the most important formulas, functions, and shortcuts to become confident in your financial analysis. When companies integrate these practices, they can ensure compliance while strengthening relationships with stakeholders and building a reputation for good governance. Fully vested founders, especially early, signal low incentive to stay. Worse, if one founder is fully vested and another isn’t, it creates imbalance and risk.

Mastering Cap Table Templates in Excel for New Funding Rounds

It lays out, dollar by dollar, how proceeds from a sale or IPO get allocated across different shareholders, starting with preferred investors, then moving through common stockholders, employees, and founders. Startups employ software tools like Carta, Eqvista and Pulley to automate cap table management, thus reducing errors and assuring transparency. When a company performs a fundraising activity its current shareholders experience reduced business ownership percentages. The fundraising process normally results in ownership dilution which threatens founder control unless careful planning occurs. The capitalization table shows each investor’s equity capital stake in the business, which is calculated by multiplying the share price by the number of shares owned. The names of the security owners will be listed on the y-axis in most cases, and the types of securities will appear on the x-axis.

In the example below, the founders, who currently own 100% of the company, want to add an option pool for key hires equal to 7.5% of the company. The new shares added to provide ownership results in dilution for the existing owners. When negotiating with investors for new funding, investors are interested in seeing how the company’s ownership is structured and the changes that have occurred in the previous financing rounds. For large public companies, “cap tables” are pointless because these companies mostly have common shares with a small number of employee-owned options, restricted stock units (RSUs), and other dilutive securities.

While Excel-based cap tables are still in use, they are increasingly seen as outdated due to their limitations. They lack a single source of truth, which can lead to errors and complications. As a company scales, transitioning to specialized software becomes essential for efficient cap table management. Additionally, most founders forget that they already have an option pool from previous rounds. Investors asked for a new 10% option pool, but they structured it pre-money. That means the pool was added before calculating the new investor’s share, diluting founders instead of the investor.