Cap Table

Quick Facts

• Full name: Capitalization table
• Purpose: Tracks all equity ownership in a company
• Updated: After every financing, option grant, or equity event
• Tools: Carta, Pulley, Shareworks, or spreadsheets (early stage)

A cap table (capitalization table) is a spreadsheet or database that tracks who owns what percentage of a company, including all shares, options, warrants, and convertible securities. It's the definitive record of equity ownership.

In Plain English

A cap table is your company's equity scoreboard. It shows exactly who owns how much—founders, investors, employees with options, anyone with a claim on equity. When you raise money or grant options, the cap table updates to reflect the new ownership percentages.

What a Cap Table Includes

Basic Components

• Common stock: Shares held by founders and employees
• Preferred stock: Shares held by investors (with special rights)
• Stock options: Unexercised employee options (and the option pool)
• Warrants: Rights to purchase shares at set prices
• Convertibles: SAFEs, convertible notes, and other instruments that convert to equity

Key Information Tracked

Column	What It Shows
Shareholder name	Who owns the equity
Share class	Common, Series A Preferred, etc.
Shares owned	Number of shares
Fully diluted %	Ownership including all potential shares
Vesting status	Vested vs. unvested shares
Price per share	Original purchase/exercise price

Fully Diluted Ownership

Cap tables show ownership on a fully diluted basis—meaning all potential shares are counted:

• Outstanding common stock
• Outstanding preferred stock (as if converted)
• All vested AND unvested options
• Unallocated option pool
• Warrants and convertible securities

Example:

• Founders: 6M shares (60%)
• Series A investors: 2M shares (20%)
• Option pool: 2M shares (20%)
• Fully diluted total: 10M shares

Even though only 8M shares are actually issued, the option pool counts toward fully diluted ownership.

How Cap Tables Change Over Time

Seed Stage

Founders:     80%
Option Pool:  20%

After Series A

Founders:     56%
Series A:     24%
Option Pool:  20%

After Series B

Founders:     42%
Series A:     18%
Series B:     20%
Option Pool:  20%

Each round dilutes everyone proportionally (unless anti-dilution provisions apply).

The Option Pool Shuffle

Investors often require the option pool to be increased before their investment (from the pre-money valuation). This means:

• Founders bear the dilution from pool expansion
• Investors' ownership is calculated after the pool increase
• A "20% option pool" request can significantly impact founder ownership

Example:

• Pre-money: $8M, Post-money: $10M
• Investor gets 20% ($2M / $10M)
• But if founders must create a 20% pool first, they're actually giving up 20% + 20% of their stake

Cap Table Complexity

Early-stage cap tables are simple. Late-stage cap tables can be incredibly complex:

• Multiple share classes with different rights
• Liquidation preference stacks affecting payout order
• Anti-dilution adjustments changing conversion ratios
• Convertible instruments with caps and discounts
• Vesting schedules for hundreds of employees
• Secondary transactions (employees selling shares)

Common Cap Table Mistakes

1. Not maintaining it: Letting the cap table become outdated
2. Excel errors: Formula mistakes in complex spreadsheets
3. Missing convertibles: Not modeling SAFE/note conversions
4. Ignoring vesting: Not tracking vested vs. unvested
5. Over-granting options: Depleting the option pool
6. Handshake equity: Verbal promises not documented

Cap Table Software

Tool	Best For	Pricing
Carta	Mid to late stage	$$$$
Pulley	Seed to Series B	$$
Shareworks	Enterprise	$$$$
Spreadsheets	Pre-seed	Free

Most companies switch from spreadsheets to software around Series A, when complexity increases and audit trails become important.

What Investors Look For

When reviewing a cap table, investors check:

• Founder ownership: Do founders have enough equity to stay motivated?
• Clean structure: Is the cap table organized and accurate?
• Option pool: Is there enough to hire key employees?
• Prior investor terms: Any problematic preferences or anti-dilution?
• Dead equity: Departed founders/employees holding significant stakes?

Cap Table Modeling

Before fundraising, founders should model how different scenarios affect ownership:

• What ownership % do investors get at various valuations?
• How does option pool size affect founder dilution?
• What happens in a down round with anti-dilution?
• What do founders receive at various exit values?

Practical Takeaways

For founders: Your cap table is a legal document—keep it accurate and updated. Use professional software once you raise institutional money. Model your cap table before negotiations so you understand the real impact of term sheet provisions.

For investors: Always request a fully diluted cap table before investing. Verify it matches the company's records. Pay attention to convertible securities that haven't yet converted—they affect your eventual ownership.

Related Reading

• Vesting Schedule — How equity is earned over time
• Anti-Dilution Provisions — Terms that can change the cap table
• Liquidation Preference — Payout order in an exit
• SAFE — Pre-equity instruments on the cap table