How do you make a capital table?

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 name of investors

investors

An investor is an individual that puts money into an entity such as a business for a financial return. The main goal of any investor is to minimize risk and maximize return. It is in contrast with a speculator who is willing to invest in a risky asset with the hopes of getting a higher profit.

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Definition, Investing, Individual vs. Institutional Investors

/security owners on the Y-axis, while the type of securities is listed on the X-axis.

How does a capital table work?

The capitalization table shows each investors' equity capital stake in the business, which is calculated by multiplying the share price by the number of shares owned. In most cases, the names of the security owners will be listed on the Y-axis and the types of securities on the X-axis.

What is a cap table example?

Cap table example. Cap tables usually include a list of names or groups (founders, investors, common stockholders, etc.) on one axis and details around what they own (what type of securities, how many they own, when they invested, what percentage of the company they own, etc.)

What makes a good cap table?

The cap table should show the company's overall capital structure at a glance, as well as detailed ownership information for each class and series of stock outstanding (see an example at the end of this article). Most importantly, it should always be accurate and up to date.

What do investors look for in a cap table?

A cap table lists out all of a company's securities—such as common shares and preferred shares, options, SAFEs, convertible notes, and warrants. It also shows how much of each security type each investor owns, the value of their respective stakes, and their current ownership percentage.

Cap Tables for Startup Founders Part 1: Pre-Investment

Can an LLC have a cap table?

LLCs can use cap tables for a number of reasons, including: Raising money from investors, as the cap table shows how the company is structured as well as past financing rounds. Often, cap tables can answer investors' questions and let them see how their investments will impact other investors.

Is a cap table a legal document?

US laws allow cap tables to be used as a formal legal record of equity ownership, and must, therefore, be continually updated to reflect any changes in the stock ownership.

Do you share cap table with investors?

Thankfully, your cap table tells the same story to everyone. One of the easiest ways to ensure consistent messaging among your investors is to share cap table details with them. And the benefits of doing so are immense; in addition to communication becoming clearer, it also becomes faster.

What is a messy cap table?

As equity is so important to founders, key employees, and investors, a clean cap table should include only them. A messy one includes anyone other than them. The equity percentages of founders, key management team, and investors can be in double digits (e.g. 10% to 99%).

What does a clean cap table mean?

A clean cap table means that it is up-to-date for the latest transactions, accurately reflects company ownership, and shows options available to employees or capital providers. All this information needs to be quickly assessed to understand shares authorized, issued, and outstanding.

What percentage do investors get?

With most startups, the general rule is to offer approximately 20-25% of your business earnings to an investor. That's assuming that the investor is pitching in when the business is still new.

What is a capitalization plan?

Definition

A capitalization plan is a document that lists the sources and uses of capital that the CDFI plans to accumulate. It provides a rationale for capital requests and places the capital within the context of the CDFI's operations and growth strategies.

How do you calculate price per share on a cap table?

It's quite simple: just divide your pre-money valuation by the total “fully-diluted” capitalization calculated immediately prior to the financing on a fully-diluted basis. That will be the price per share new investors will purchase at.

Does a cap table Show debt?

All debt should be recorded in a section of the cap table. It is helpful to include the following information in the cap table document so you will understand how much equity might be issued to noteholders at some point in the future: Date the debt was incurred. Amount of indebtedness.

How do you avoid dead equity?

Dead equity can't always be prevented, but it can be minimized. For co-founders: Set up vesting schedules: when co-founders begin a business together, having strong vesting schedules – in which founders “earn” their stock ownership over time by working hard on the business – is critical.

Is a cap table confidential?

The answer to this question is no. In fact, most companies choose to keep their cap tables private and confidential. Even so, there are several parties within a company that need access to certain information on your company's cap table.

What challenges do you foresee in determining ownership and creating your cap table?

How do you keep a cap table?

How do you clear a cap table?

The idea behind cleaning a cap table is simple: restructure the cap table so that who owns what can be seen clearly without surfing through pages or calculating things. It should also show the market price and all the equity classes that are there in the company. To restructure the cap table is quite easy.

What is a SAFE note example?

Here's an example: An investor puts $500,000 into your company through a SAFE note. They get a discounted rate of 20% and you decide on a valuation cap of $2 million. You go on to raise your seed round in a few years and your lead investor sets a valuation of $4 million.

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What does capital include?

Capital is typically cash or liquid assets being held or obtained for expenditures. In a broader sense, the term may be expanded to include all of a company's assets that have monetary value, such as its equipment, real estate, and inventory. But when it comes to budgeting, capital is cash flow.

How do you calculate dilution on a cap table?

To calculate the shareholders' diluted participation, we proceed to divide the number of shares assigned to each shareholder by the new total nominal value of stocks. In our example, the total number of shares will amount to 30,000 (25,000 initially distributed to founders, and 5,000 new issued shares).

What is capitalization and examples?

Capitalization means using capital, or upper-case, letters. Capitalization of place names, family names, and days of the week are all standard in English. Using capital letters at the start of a sentence and capitalizing all the letters in a word for emphasis are both examples of capitalization.