Broken Cap Tables

A VC : Venture Capital and Technology

A “cap table” is a schedule of all the shares outstanding for a specific company. Here’s an MBA Mondays post I wrote back in 2011 on the subject of cap tables. If you want to know how much of a company you own, a cap table is the best way to figure that out. Cap tables are almost always prepared and kept in spreadsheets, usually excel, but also increasingly google sheets.

Model Cap Tables With VCHub

Ask The VC

A few days ago I answered a question on AsktheVC about modeling cap tables. Jeff has done a nice job building a site that both models a cap table and provides a lot of information to empower entrepreneurs both with educational resources and software tools. In addition to modeling a cap table and ownership of the company, Jeff’s software helps answer questions like “if I sell for $100M, how much money does everyone receive.&#.

Trending Sources

Spreadsheets To Model Cap Tables

Ask The VC

Question: One thing that I think would be incredibly helpful would be to have a spreadsheet showing how a cap sheet evolves under a set of financing rounds with the important variables parameterized so we can play with them. However, there are plenty of resources for cap tables on the web. Venture Hacks: How To Make A Cap Table. AskVenture.com: Sample Cap Table. StartupNetwork: Capitalization Table. ModelSheet: Capitalization Table.

Founders – Use Your Down Round To Clean Up Your Cap Table

Feld Thoughts

“If you need to clean up your own cap table first – while very hard to do – it will make outside funding easier” Again, go read the post now – I’ll wait. Often, there will be asymmetry between them with your new liquidation preferences having a multiple on them where they participate for a while up to a cap. Deal with reality as a founder as well as an investor group and avoid this complexity – just clean up your cap table instead.

Introducing the Cap Table and Hiring the CTO

Feld Thoughts

As Finance Fridays continues, we are introducing the concept of the Cap Table. This week they set out to create their cap table and hire a CTO. Rather, it gets recorded in a document called the Capitalization Table (or “Cap Table”), which shows the ownership stake each person or entity has in the business. Time to update the cap table. When you read the cap table, think of it as a series of events that add new columns to the right.

Cap Table Clean Up

ithacaVC

When raising money from investors (angels or VC), it is critical to have a presentable and clean cap table. On a fully diluted pre-money basis, that would mean the option pool represents 14.5% (356,758/2,456,758) of the cap table. QUESTION #1: This leads to our cap table clean up question #1, namely is that the right allocation? Too much convertible debt on your cap table is a pain in the butt to deal with as it will drive down your valuation.

That convert you raised last year is a part of your cap table

Seth Levine's VC Adventure

This is typically reflected on cap tables in a completely separate tab to the spreadsheet that shows the debt total by investor and then some kind of interest calculation. Of course many entrepreneurs naturally focus on the main tab of their cap table spreadsheet that shows ownership by founder, investor, etc and for them this is the starting point of negotiating a round. This is especially true when the round price is significantly higher than the convert cap.

Great, Simple Cap Table Tool for Startups from SMARTASSET

Scalable Startup

One of the top 3 to 5 worries when launching a startup is is “Who gets how much stock upon start or joining? Founders, Co-Founders, next employees, Investors, Etc. The founders of SmartAsset went through this process and decided to open it up to the world. These guys put together something very cool and it follows the “Give before you get” rule. They call it STARTUP ECONOMICS. Here it is… https://www.smartasset.com/infographic/startup.

Gust Launches Comprehensive Equity Management Platform for Cap Table Management and 409A Valuations

Gust

The post Gust Launches Comprehensive Equity Management Platform for Cap Table Management and 409A Valuations appeared first on The Gust Blog. Gust News Starting Your Company 409A valuations cap table management equity managementGust announces acquisitions of Sharewave and Preferred Return; creates the most robust and affordable equity management solution for early-stage startups.

That convert you raised last year is a part of your cap table

Seth Levine's VC Adventure

This is typically reflected on cap tables in a completely separate tab to the spreadsheet that shows the debt total by investor and then some kind of interest calculation. Of course many entrepreneurs naturally focus on the main tab of their cap table spreadsheet that shows ownership by founder, investor, etc and for them this is the starting point of negotiating a round. This is especially true when the round price is significantly higher than the convert cap.

Beware the “dirty cap table.”

Berkonomics

When you seek professional investors, whether organized angels or venture capitalists, one of the early questions you are asked is “How have you financed the business so far?” Investors love to see entrepreneurs who have used their own money to ignite their businesses. But often, entrepreneurs turn to others for initial capital. Describing that capital using the phrase “friends, family and fools,” or “FFF,” has become as common as to be trite.

Cap Table Hygiene

Will Price

Conversely, deals that come with cap table challenges (too many investors, too much prior preference, or onerous terms granted to a prior round) are often dead on arrival. Teams of 2-3 founders seem to be the norm and cap table issues, questions about equity (wrt fairness), often arise if the team gets much bigger. Venture capitalists are very much tabla rasa investors. One frequently hears about deals with "no hair," "plain vanilla terms," and good hygiene.

Reblog – Finance Fridays (Introducing the Cap Table and CTO)

ithacaVC

Here is the latest edition of Finance Fridays from Brad Feld called “Introducing the Cap Table and CTO” Every startup needs someone to be in charge of the Cap Table. When I was General Counsel at a tech company during the 1999 bubble times, I kept the company’s Cap Table. And now as a VC, I keep the Cap Table for a few of the company’s for which I am a board member. should have its own tab on the Cap Table.

eShares

A VC : Venture Capital and Technology

But in the world of VC and startups there isn’t much that is more broken than cap table management. eShares fixes that by putting the entire cap table online and allowing your company to issue new shares and options directly from the platform. One of the co-founders replied via email “we don’t need that, our cap table is all in a single spreadsheet.” A perfect cap table is very rare, unless you are using a tool like eShares.

Convertible and SAFE Notes

A VC : Venture Capital and Technology

I cannot tell you how many angry pissed off angel investors I have had to talk off the ledge when we are leading a priced round and they see the cap table and they own a LOT less than they thought they did. The company has been around for a few years and has financed itself along with way with all sorts of various notes at various caps (or no cap) and finally the whole f **g mess is resolved and nobody owns anywhere near as much as they had thought.

Five Reasons To Bootstrap Your Startup

Inc Startups

Startups look for investors to gain the resources they need to move forward (not to mention, getting a Silicon Valley VC on the cap table is likely to give entrepreneurs a huge ego boost) but are startups missing out by not bootstrapping

The End Of The Level Playing Field

A VC : Venture Capital and Technology

I am old enough to remember the gogo days of cable TV when entrepreneurs who wanted to launch a new cable channel would go, hat in hand and cap table in tow, to the big cable companies and beg to get distribution on their networks. When the Internet came along in the early 90s, we saw something completely different. Here was a level playing field where anyone could launch a business without permission from anyone.

Clean Up Before Raising Funding

Instigator Blog

Cap table. Make sure you have an updated cap table ready to go. Oftentimes startups add employees or mentors and forget to update the cap table to reflect those changes. (Powered by LaunchBit ). Raising money is a dirty job, but someone has to do it right?

The Blurring Of The Public And Private Markets

A VC : Venture Capital and Technology

Privately held companies are increasingly using electronic stock ledgers (like the one our portfolio company eShares offers) which allow them to easily manage a large and rapidly changing cap table, much like the function that brokers and transfer agents provide in the public markets.

The Rainy Day Fund of Reputation

This is going to be BIG.

What happens when a founder has that rare wealth of riches when they're choosing who they're going to allow onto their cap table? The tables turn and the one being pitched to becomes the one pitching. Every time you slip an obnoxious term into a cap table, or take six positive meetings before ultimately passing for a reason that should have come out in meaning one, you're debiting your rep.

Employee Equity

A VC : Venture Capital and Technology

Andy was a founding partner at Benchmark and knows his way around a startup cap table. Longtime readers will know this is a topic near and dear to my heart. I did a whole MBA Mondays series on this topic and I followed that up with a Skillshare class on the topic. So I was excited to see that First Round Capital featured a blog post by Andy Rachleff on this topic yesterday. Andy included this slide deck in his post and I will reblog it here. Wealthfront Equity Plan from Wealthfront.

Is There More Than One Type Of Convertible Debt?

Ask The VC

In this case there were multiple traunches of convertible debt at different valuation caps. My offer was above the highest cap, but I interpreted the way the convertible debt, and pro-rata rights associated with it, worked differently than the entrepreneur did. My partner Seth covered this nicely in his post That convert you raised last year is a part of your cap table. That convert you raised last year is a part of your cap table.

Do My Early Stage Investors Own Too Much Of The Company?

Ask The VC

Question: Most VCs commented that they can not fund current cap table where the CEO and COO would get 10% equity once fully vested while the current investors have 80%. We talked to our investors and they have agreed to rework the cap table, however, I would like to understand from you what should I change my cap table to?

Venture Deals: Chapter 7: The Capitalization Table

Ask The VC

Even if you know what a cap table is, we’ll give you a simple way to calculate the summary level ownership categories with a calculator (or a simple spreadsheet model). . Now that we’ve worked through all of the specific clauses in the term sheet, let’s go through how a typical capitalization table (cap table) works. A term sheet will almost always contain a summary cap table, which we describe in this chapter.

AngelList Syndicate Feedback From An Experienced Entrepreneur

Feld Thoughts

2) Keeping the number of entries on our cap table relatively small. We recently funded Blinkfire Analytics using our FG Angels Syndicate. The CEO and founder, Steve Olechowski , was co-founder / COO of FeedBurner, which Google acquired in 2007.

Quick Post on Post-Money Valuations

Rob Go

The main reason for this, I think, is that there has been such a proliferation of convertible notes, SAFE’s, and other instruments that it becomes tough for a new investor to feel confident that they fully understand a company’s cap table prior to an investment.

Reserves

A VC : Venture Capital and Technology

But if you want someone you can count on in your cap table, that would be a VC firm, particularly a top tier VC firm. These funds are pools of capital that are capped at some number. That recycling capability is typically capped in the agreement between the VCs and their investors. At USV, that recycling cap is roughly 25-30% of our funds.

The Resetting of the Startup Industry

Both Sides of the Table

If you need to clean up your own cap table first – while very hard to do – it will make outside funding easier. Much has changed in the past four months of the technology startup world and how outsiders value the business.

Staying Independent

A VC : Venture Capital and Technology

Possibly the most interesting running conversation I've been having with entrepreneurs lately is how they can keep their companies independent without having to go public and turn their cap table into a casino. But there are plenty of entrepreneurs who have built interesting businesses using outside capital - angel, seed, VC, or some other form - and they have a portion of their cap table that is seeking a return on their capital on some reasonable timetable.

So What is The Right Level of Burn Rate for a Startup These Days?

Both Sides of the Table

If on the other hand we have committed $10 million and if you don’t have 3 other investors around the table and if you’re burning $800k / month (implying you need $10 million more to fund one-year’s operations or nearly $15 million to fund 18 months) – we’re simply “ over our skis ” in order to help you because we wouldn’t put $25 million in one company at our size fund. How Complicated is Your Cap Table?

Meaningful Exits for Founders

Bryce Dot VC

We don’t know how many rounds this company has raised, how many other VCs are on the cap table, nor how much the founders own. For an industry that doesn’t do it for the money, we sure talk about money an awful lot in the world of startups.

One (round) and Done

Bryce Dot VC

Unlike many startups who will go out of business if they aren’t able to raise another round, Text IQ seems to have a more specific need with this raise; namely, to get certain skills, expertise and networks around the table and invested at different level as they build their business Through our work with Indie.vc Founders can trade the fundraising treadmill for the freedom, control and ownership that comes with managing your cap table closely.

7 Ways Due Diligence Helps Before Final Commitment

Startup Professionals Musings

Be prepared to present a detailed cap table, identifying by percentage all owners, investors and debtors. Most entrepreneurs work long and hard to get a handshake agreement from an investor, and then tend to relax and wait for the check to clear.

Who are stock certificates issued to and when?

Ask The VC

Furthermore, cap table are not filed anywhere. Q: We are a Delaware C Corp registered as a Foreign Entity in Colorado our home state and we need to figure out the answers to the following questions with regards to stock certificates.

Advising vs. Investing

Instigator Blog

This has happened a few times when I’ve looked at cap tables. Occasionally, I get asked to serve as an advisor to a startup founder. In the past I genuinely enjoyed the role and tried very hard to help wherever I could.

The Silliness Of Recapping Seed Rounds

Feld Thoughts

A company raises $1m of seed money from angels in a convertible note with a $6m cap. Assuming equity is raised at or above that cap, the total dilution, before the new money, is 16.6% (equivalent to an equity financing of $1m at a $6m post money valuation. It usually happens in a later round, when the company is in fact worth much less than the liquidation preference overhang and insiders use a pay-to-play and a low valuation to reset the preferences and the cap table.

Messing Around At The Fringe

A VC : Venture Capital and Technology

Just as wading in the muck of cap tables and share purchase agreements is the best way for an analyst to learn the mechanics of venture investing, wading in code and API’s and forums is the best way to discover the things that others have not discovered yet. Jonathan Libov has spent a couple years at USV in our two year analyst program and is about to move on to his next thing.

What Scales?

This is going to be BIG.

Yet, as cash friendly as Slack could be--where it could easily have Kickstarter or Craigslist-like cashflow to cap table like ratios, it is still raising hundreds of millions of dollars. I've got a great deal for you. It requires you to set up the operation from scratch in every city--and it probably only works in cities. There is a ton of regulatory risk. Right now the market is pretty much only high net worth individuals. You only invest in scalable businesses?

What is the Definition of a Seed Round or an A Round?

Both Sides of the Table

It is less about actual money and more about structure of your Cap Table.

An Alternative to Board Decks Some Seed VCs Actually Prefer

View from Seed

Examples of housekeeping include the following list, though not every item will appear every time: Finance: Cash out date, burn rate, 409A valuation, cap table, common/preferred stock dashboard.