Cap Table

A capitalization table shows who owns what in your startup. Understanding it is essential before any fundraise.

Definition

A capitalization table (cap table) is a spreadsheet or ledger showing a company's equity ownership structure. It lists every shareholder, the number of shares they own, the type of shares (common, preferred, options), and the percentage of the company each represents.

Who Appears on a Cap Table

  • Founders: Common shares issued at founding (sometimes with vesting schedules)
  • Investors: Preferred shares issued in exchange for capital
  • Employees: Options (usually under an ESOP — Employee Stock Option Pool)
  • Advisors: Options or warrants issued for advisory services

Key Concepts

Pre-Money vs. Post-Money Valuation When you raise a round, the valuation matters because it determines how much of the company you're selling.

Example: Raise $1M at $4M pre-money = $5M post-money. Investors own $1M ÷ $5M = 20% of the company.

Dilution Every time you issue new shares (to investors, employees, or advisors), existing shareholders own a smaller percentage of the total. This is called dilution.

Dilution isn't inherently bad — if the company's valuation grows faster than your percentage shrinks, your absolute value increases.

Vesting Most founder and employee shares vest over time (typically 4 years with a 1-year cliff). This incentivizes long-term commitment and protects the company if someone leaves early.

ESOP (Employee Stock Option Pool) A reserve of shares set aside to offer employees and advisors. Typically 10–20% of the total shares. Investors often require an ESOP expansion as part of a funding round.

Why Cap Tables Matter

  • Every fundraise changes the cap table — you need to model this before you negotiate
  • Future rounds dilute all existing shareholders
  • Liquidation preferences determine who gets paid first in an exit
  • An overly complex or messy cap table can complicate future fundraising

Tools for Managing Cap Tables

Carta, Pulley, and Captable.io are purpose-built tools for managing cap tables digitally. For very early-stage companies, a shared spreadsheet works fine initially.