What does cap table look like?

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.) on the other axis.

What's included in a cap table?

In general, the capitalization table is an intricate breakdown of a company's shareholders' equity. Cap tables often include all of a company's equity ownership capital, such as common equity shares, preferred equity shares, warrants, and convertible equity.

What should the cap table look like for startup?

A cap table, or capitalization table, is a chart typically used by startups to show ownership stakes in the business. It lists your company's securities (i.e., stock, options, warrants, etc.), how much investors paid for them, and each investor's percentage of ownership in the company.

What is a good cap table?

A good cap table has the following characteristics: The CEO (original founder) owns the most. The founders own as much as possible. There is an ESOP already of around 15%

What 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

How do you structure a cap 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/security owners on the Y-axis, while the type of securities is listed on the X-axis.

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.

Should you share your cap table?

As long as this information is provided, not much is required to be shared. It is difficult to provide customized access using excel sheets. But cap table software provides this personalized feature to every employee.

Does an LLC need a cap table?

Members of an LLC must produce a cap table before creating other business papers in the early phases of the firm's creation. Most LLC cap tables are established after a few rounds of fundraising, when the funding sources grow complicated.

Who should manage the cap table?

Most companies rely on competent legal counsel to maintain their cap table and provide their executive team with actionable information in a digestible format. Here are six best practices that help founders improve and maintain an effective cap table management process.

Does a cap table include 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.

Are warrants included in the cap table?

A cap table is a tool used for startups or new businesses to show the ownership of the company. This normally includes common shares, preference shares, options, warrants, convertible notes, and many others.

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.

What is a pro forma cap table?

A pro-forma capitalization table is a spreadsheet that reflects the capitalization structure of a company today as well as immediately following a potential investment (i.e. on a “pro forma” basis).

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.

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%).

How much equity do start up employees get?

Up to this point, generally speaking, with teams of less than 12 people, the average granted equity for startup employees is 1%. This number can be as high as 2% for the first hires, and in some circumstances, the first hire(s) can be considered founders and their equity share could be even greater.

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.

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.

How do warrants work in a SPAC?

A warrant is a contract that gives the holder the right to purchase from the issuer a certain number of additional shares of common stock in the future at a certain price, often a premium to the stock price at the time the warrant is issued.

How do warrants work on a cap table?

Warrants. Warrants are like options. They are a contractual right to purchase a specified number of shares for a specified price at a specified future date. Warrants may use shares set aside in the pool, but they are typically “one-offs” and are not included in the stock option plan.

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.

How does convertible debt affect cap table?

The lower share price is because the debt converted before the round and there are now more shares on the cap table. With a lower share price, the new investor receives more shares and this leads to even greater dilution to the founders than in the original scenario.

How many times revenue is a business worth?

Typically, valuing of business is determined by one-times sales, within a given range, and two times the sales revenue. What this means is that the valuing of the company can be between $1 million and $2 million, which depends on the selected multiple.