Cap Table or Capitalization Table!

  • Written Written by Equity team 03 February 2023 | 4 min read
  • Editor's Note :

    Understanding a company's Cap Table is a critical aspect of due diligence for investors and potential acquirers. Understand why accurate and up-to-date Cap Tables are essential for fundraising, mergers and acquisitions, and other critical business decisions.

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One simple way to understand the Cap Table is who owns the Company and what is the pie of the total company’s worth each individual is holding. All the securities, shares, warrants, convertible notes, ESOPs, etc.
A Cap Table contains the list of individuals or shareholders of a company on an outstanding or fully diluted basis. Who owns what and in which form is another simple version of explaining the Cap Table.
For Example – there are 3 founders in a start-up and their ownership or shareholding in the company is divided at 40:30:30 (holding shares as 40k, 30k and 30k respectively). So the Cap Table be like below: -

Captable diagram

Shareholders
No of Shares
% of Stake
Founder 1
40,000 
40%
Founder 2
30,000 
30%
Founder 3
30,000 
30%
Total 
1,00,000
100%

The above example is how a traditional cap table looks like when we prepare the same manually on an Excel or Spreadsheet, Now let us see the below Cap Table on how it will look in a Digitized environment.

Need of a Cap Table?

The Cap Table is a statement that tells the % stake every promoter or founder or investor holds in the company at a given point of time and the stake of ownership is required in many corporate matters (voting rights, passing a resolution, key decision making, fundraising.
A Cap Table software is also helpful for a new or prospective investor in any startup or company as with the Cap Table the upcoming investors can get a taste or glimpse of the existing shareholding in the company and this will also help the investors in knowing who all are current stakeholders in the company, what is their individual o/s or diluted shareholding, how much my % of holding will be in the company post the funding round and much more.
On the other hand, the founder can check the cap table to understand how much can be diluted in the future round of funding and which investors should be invited first and what % of stake can be given to any new or existing investors post the funding round. They can also check what are the terms & conditions in respective SHA (Shareholding Agreement) with different investors/shareholders.

How shall I Create a Cap Table?

How you want to manage the Cap Table also decides on the stage of your organization (Early Stage, Seed Stage, Series A, B, C etc.) You can create the same at an early stage on an Excel Sheet or G-Sheet (Download our Free Template), but once more and more investors start coming on to your cap table then it becomes very complex to manage and have an up-to-date Cap Table on real-time basis catering to all the requirements from Compliance, Taxation, Investors, etc.

Using a Equity Management Platform?

Once you start growing or expanding your business, raising money in frequent tranches and rounds, the best solution to your challenges will be to have an Equity Management Platform. This will help you in sending faster updates to your investors as and when required and better transparency & real-time visibility can be provided to all the stakeholders.

Captable management

About Vega Equity

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.

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