Cap Tables Explained: Guide to Understanding Cap Tables

Board Effect

Capitalization tables—”cap tables” for those who don’t have time for extra syllables—map the balance of power in a company. If org charts are about people power , cap tables are about money power. In reality, however, cap tables are often far more complex. Let’s dive deeper into understanding cap tables; what they are, why (and to whom) they matter, and how they’re used. What is a cap table? Why do cap tables matter?

What Your Cap Table Tells Investors About You and Your Company

Gust

If you have raised capital from investors before, you probably noticed that one of the first requests from potential investors is for you to send them your current cap table. Why would an investor be so interested in seeing your cap table?

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Startup Cap Table Management: What to Know as You Grow

Board Effect

Let’s not waste time listing everything startups could be doing to more effectively manage their cap tables. When it comes to cap table management in startup companies, it’s unrealistic to expect perfection. What does your cap table need to address at each stage of growth? The realistic demands of cap table management will increase as your business grows and matures—that much is a no-brainer. Defining Cap Tables.

Model Cap Table

ithacaVC

I thought it might be useful to post up a model cap table ( Cap Table Model with Waterfall ). This cap table can be used by a pre-funded startup and then a financing can be layered in. They are simple, but critical to understanding how the cap table works and how valuable the cap table can be to your understanding of your stock holdings.

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.

Cap Table Explained — What is it and How to Maintain it for Investors

Up and Running

This is all incorporated into a document called a Cap Table. . A cap table will help you in the strategic management of business decisions. Wondering what a cap table is, its importance, and how you can maintain it to expand your business?

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.

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.

Does your company have a “dirty cap table?”

Berkonomics

How it happens. 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.

Could you have created a “dirty cap table?”

Berkonomics

The risk of the “dirty cap table”. Oh, I know. When you started the business, you took investments from friends and family in small amounts just to get you started. Of course, that worked at the time. Enter the need for larger investments. 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?”

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.

The “reverse” pitch: Who should you have on your cap table?

Version One Ventures

How do you decide who you should have in your cap table? The post The “reverse” pitch: Who should you have on your cap table? When we think about pitches, most of the focus is on entrepreneurs pitching investors for capital. But VC can be competitive, particularly for interesting deals, and in many cases, the pitch meeting is a two-way street. Some of the best later-stage investors walk founders through an institutionalized “reverse” pitch.

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

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.

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.

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

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.

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

Gust

It is less about actual money and more about structure of your Cap Table. Invested Interests cap table venture capital Marc Andreessen kicked off another great debate on Twitter last night, one that I’ve been talking about incessantly in private circles for the past 2-3 years – what actually IS the definition of a seed vs. A-round. Cautionary note: No competent VC is actually fooled when you show up after raising $6M in seed financing and say you’re now raising an A!

How I closed a round with 7 Investors and Survived [Guest post]

VC Cafe

101 funding Soomla Yaniv Nizan cap table Eyeview VC Funding is never easy. Even when you hear stories about entrepreneurs who walk out of a VC with a personal check from the managing director, it is usually after 6 months of pitching and hearing ''no''. This is the story by Yaniv Nizan from Soomla, who raised a round from 7 investors and lived to tell the tale. [[ This is a content summary only. Visit my website for full links, other content, and more! ]].

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.

Seed Stage Founders Undervalue Angels With Marketing & Comms Expertise

Hunter Walk

Why Bringing These Two Skillsets Onto Your Cap Table Early Is Worth It. Who else is already committed to the round and what do they bring to the table? So get them on your cap table instead of your org chart, versus just lacking access to this DNA until post-Series A.

What I Tell All New VCs About Their First Funds

Hunter Walker

Be more helpful than the folks on cap tables today who overpromise and underdeliver — every cap table I’m on has some percentage of allocation that provided zero value after the investment. No Need To “Grab a Coffee and Pick My Brain” Because Here’s What I’d Say….

Succeeding in Venture Capital is Mostly About Knowing What to Buy. But When To Sell Matters Also.

Hunter Walk

Y ou’ve got to know when to hold ‘em Know when to fold ‘em Know when to walk away And know when to run You never count your money When you’re sittin’ at the table There’ll be time enough for countin’ When the dealin’s done. Primary Thoughts About Secondary Transactions.

Off to the Races with Team Nextview

View from Seed

I became a venture capitalist, specifically a seed investor, to provide early support to the dreamers and builders working to positively change how we live, work, learn, play, and care for our planet and each other.

3.5 Notes From Our Most Substantial Venture Exit So Far

Hunter Walker

I strongly believe the detailed story of the company’s success is the founders’ one to tell if they choose to do so, but at the risk of excessive inside baseball, I’ll share my perspectives from the cap table. Aligned Cap Tables Are a Godsend: Especially when the founders are considering an early acquisition, aligned cap tables are a godsend.

If You’re Not Sure Whether Your Current Investors Would Give You More Money, The Answer Is Likely “No”

Hunter Walker

Startup CEOs Should Test Strength of Cap Table Every ~6 Months To Know Where They Stand. Lastly, Jason has a single very practical suggestion on what to do if your cap table is tapped out.

Second Lap Around the Track

OnlyOnce

I wrote a little bit about the experience of being a multi-time founder in this post where I talked about the value of things like a hand-picked team, hand-picked cap table, experience that drives efficient execution, and starting with a clean slate.

As an investor, what are the most important items that a startup must have for you to invest?

Gust

Viable business structure and cap table. Large and growing market. Real domain expertise. Provable product need. Scalable business model. Competitive advantage. Platform/partnership/bizd ev/API strategy. External validation (ideally traction and/or passionate customers). Reasonable valuation. Proven team (tech/product/design/mark eting/sales/domain/etc.). But most important of all , it must have an entrepreneur on whom I’m willing to bet.

I’m Having a Blast at Bolster — Here’s Why

OnlyOnce

And for the most part, the same is true about our cap table. No institutional debt like a messy cap table, legacy people issues, leases for offices we don’t want or need any more.

How Venture Capital Firms Work, for Entrepreneurs and Startups

OnlyOnce

I redacted our cap table and pictures of our VCs, but otherwise, feel free to use it with your own management team, or even your whole company. A couple of months ago, I was doing an internal lunch & learn for senior managers, and the topic came up as to “how do our VC firms work?”

The Version One Anti-Portfolio – the opportunities we missed…

Version One Ventures

Carta went on to become the standard for cap table management and is a unicorn many times over. . Bessemer started the idea of the “anti-portfolio” – the companies that you passed on, but ended up doing very, very well. .

Should you include a Series A investor in your seed round?

Version One Ventures

One of the most important decisions for a founder of an early stage company is deciding who should be on the cap table. Other A funds look to invest in seed rounds as a way to get a seat at the table, in order to have more options for a later round. in order to have a seat at the table for the next round. That’s why it’s critical to understand a the fund’s underlying philosophy on seed: is it true ownership or just a seat at the table? .

Early Stage Advisor Equity Grants

Eric Friedman

I have been on both sides of the cap table of advisors. Having them on your cap table, or even in your slide deck as an advisor would bring you credibility.] Have we leveraged everything they bring to the table? Advisor helping a startup – Midjourney.

Company Culture Is Really Important, But The Way We Talk About It Is Wrong

Hunter Walk

Whether I’m on an org chart or cap table, I’ve historically found that culture is the most difficult part of a company to refactor once matured. What Makes A Culture “Bad” Isn’t Just That You Don’t Like It. I won’t invest in a startup that doesn’t care about its culture.

We Don’t Talk Enough About Money In Silicon Valley, Revisited

Hunter Walker

Those of us who’ve had access to the right hiring manager, or cap table, or referral network have already put ourselves in a position to capitalize, but the pie can be expanded. Things to Remember As You and Your Friends Get Wealthy. Giraffe money.”

Startups Should Be Responsible for Explaining Equity to New Employees

View from Seed

This is not an argument for circulating the entire cap table or compensation calendar. When someone goes to work for a larger corporation or public company, the compensation package generally includes an annual salary, a performance bonus or commission plan, 401(k), and health insurance.

Equity 237

Oh S**t, Your VC Just Quit Her Fund! What a Good CEO Should Do Next.

Hunter Walker

All the disruption can be pretty jarring to an entrepreneur, especially in situations where the exiting partner represents the top line on your cap table. After that, there’s often enough people around the table to manage the loss/transition of a GP/Board Member (even if it sucks). You’ll often need the support – both structurally and symbolically – of some other investors on the cap table to make the case for some of the ideas below to work.

Should You Take Money from Investors Who Don't Share Your Values?

This is going to be BIG.

Morality aside, I’d say given the inherent riskiness of startups, I’m not sure this would be a great addition to your cap table. I will die on the hill that life is too short to have misogynistic asshats on your cap table—even if it takes you longer to fundraise

Pitch Deck Month: The “Ask” Slide

View from Seed

To provide relevant perspective, listing past convertible note(s) and/or equity financing(s) including total round size and valuation (caps) is helpful. Previous venture firms’ specific involvement on the cap table should be noted here, though. *This post is part of our “pitch deck” series where we dissect the seed stage pitch deck and discuss the ideal flow for a pitch. You can read the rest of the posts in the series by clicking here *.

500 Founders: Thomas Clyma, Tina Chou, DEAN BROWN & Knight Hou

NZ Entrepreneur

From how to develop your idea, to customer validation, investment, communication & marketing, governance, cap tables, due diligence, sales, are just some of the areas that as a founder you will need to navigate.

That Day When Your VC Tells You She Is Leaving Her Firm

Feld Thoughts

Hunter has a great lead in: “ Here’s where I think founders and cap tables should be more proactive. There are some blog posts that every entrepreneur should read. Hunter Walk at Homebrew recently wrote one of them. It’s titled Oh S**t, Your VC Just Quit Her Fund! What a Good CEO Should Do Next. He covers three cases: Bullish aka You Are Absolutely Killing It Written You Off Too Early To Tell – Some Good Stuff, Some Challenges But A Lot To Do.

Why you should never have a data room — the most counter-intuitive fund-raising advice you’ll ever…

Both Sides of the Table

Your historical trading information including financials and a “customer file” which shows the history of your transactions so that investors can run “cohort” analyses Customer reference, personal references, key team members, compensation, cap table, stock option plan, etc. Can you please send us your certificate of incorporation, your Cap Table, your 3-year P&L and last year’s historical trading information? Why you should never have a data room?—?the

Walker Twitter Highlights: August 13th – September 15

Scott Edward Walker

Solid post for young founders=> Cap Tables, Share Structures, Valuations, Oh My! I’m using Twitter as a form of micro-blogging to share interesting articles, blog posts and video clips relating to startups, entrepreneurship and legal issues. Below are my four most popular tweets for the past month. Cheers, Scott. Top 4 Tweets. A Case Study of Early-Stage Funding [link]. Determination is the most important thing.”

2 1/2 Angel Investing Mistakes You Can Easily Avoid

Hunter Walker

Then if your help simply gives them the chance to move faster with a high probability of success, you’ll have more than earned your spot on the cap table. I Made These Mistakes A Few Times But You Don’t Need To. Part of successful angel investing is picking winners.

IRR 122

Tiny Checks

This is going to be BIG.

On the other hand, some people try and pad the cap table with a bunch of big names or industry vets, even if their check size is small, just to build the network. Maybe it’s an e-mail or maybe it’s just a quarterly phone call that everyone on the cap table can dial-in to. Small investors are people, too—and there’s no upside to having a bunch of your cap table feel negatively in any way about the company.