If the company were a movie, the Cap Table would be the credits at the start and the end as to who had what part in the film. We have spoken about Cap Table quite a lot, but we still feel it is less than what we can talk about. Today, we are attempting to answer all the questions that you might have about Cap Table.
A Cap Table or a Capitalization table is a spreadsheet or a table or a graph showing the breakdown of the ownership of the organization into all the securities, shares, warrants, convertible notes, ESOP Pool, financial participation, etc. It is very useful for startups right from the early stage in understanding who the major stakeholders, investors, etc., are and what their stakes are in the company. Overall, it is a tool for entrepreneurs to understand how their finances are, especially to understand the pre and post-financing scenarios.
No, Cap Tables also comprise legal documents like stock issuances, transfers, cancellations, conversion of debt to equity, etc., and any other relevant documents about the ownership since the inception of the company. In its simplest form at the beginning of a company, a cap table lists the shareholders at the beginning and their respective share ownership.
Companies normally use spreadsheets to make Cap tables at the inception, but it becomes difficult to maintain once the dilution and funding rounds start. Either way, Cap Tables should ideally capture the information about- One, what the share percentage is, and second what the share of ownership is
Section 1: Comprising the number of shares the company is allowed to issue, it has issues, ESOP pool share, etc.
Section 2: Shareholder details and the percentage of ownership they have
Simple, it must convey all the possible information about the shareholders very easily and effectively. For example, take a look at the image below, it shows how Cap Table looks with Vega Equity.
It conveys all the information, in a simple graphic format and also shows the % of dilution according to the rounds. An ideal cap table should consist of information about :
Cap Table management is the process of maintaining and updating the Cap Table. It is to ensure that all transactions are accounted for and the data is updated, and registered after each transaction. This is to ensure that potential investors are easily able to see the equity structure during funding rounds and founders can make well-informed decisions.
There are quite a few software in the market, like trica, Qapita, Carta, etc. We would suggest Vega Equity as one of the best software for Cap Table Management as it provides a simple, accurate, and comprehensive view to harness the regulatory, and investor data, for Cap Table reporting and disclosure through a secure platform.
For early-stage startups, or those looking to have a spreadsheet-based Cap Table management, here’s a free template for your download. If you want to have something more suitable for your needs, contact us today. We offer Zero Subscription Charges for 30 ESOP Employees and the first 2 years from the Incorporation Date for startups.
One of the key uses of a Cap Table is to see how some decisions impact the equity dilution of the company. Take expansion or reduction of ESOP Pool, New investment or funding rounds, etc., and see how it affects the company dilution. In short. Cap table can be used for:
Investors would look at the following aspects to understand how the ownership of your company is distributed and what the funding raised is:
In easy words, because you have a reliable source of information and it allows you to scale as you grow with the company. Secondly, managing Cap Table with Cap Table Management software is far more efficient than managing it with spreadsheets. It removes the ambiguity and human errors that occur while dealing with spreadsheets. Plus, accessibility and sharing become a nightmare while using spreadsheets. In case you want to have the best Cap table management software on the market, schedule a demo with us!
Vega Equity offers companies an effective, intuitive, and paperless platform for managing equity. It provides accurate cap table management, customized user experiences, and precise information. Additionally, it assists in measuring KPIs, analyzing data, and tracking performance towards goals.