Cap Table Management FAQ

What is a cap table?

Every equity-issuing private company needs a cap table to track who owns how much of the company. This information can be critical to helping a company decide how it will manage funding rounds and make major decisions.

The capitalization table that most people think of is merely a representation of all the transactions that have taken place since the company’s inception. In reality, a cap table can include many transactions and legal documents, including:

Stock issuances
Sales
Transfers
Cancellations
Conversions of debt to equity
Exercises of options

Get more details

What is cap table management?

Cap table management is the process of accurately and effectively managing all the elements within a cap table. Beyond simply recording transactions, cap table management involves drafting and signing legal documents, recording transactions, communicating with shareholders and complying with regulations (among other things).

Why do startups need cap tables?

It is important to get it right from the start and a capitalization table can get complicated fast. By the time company reaches Series A or B funding, its cap table may look completely unrecognizable. Eventually, every founder may need to explore the art of capitalization table management.

Furthermore, when an investor looks at a startup as a potential investment, it will likely ask for the cap table. It can also be required for the 409A valuation that will determine the fair market value (FMV) of the company’s equity.

Why change from spreadsheets to cap table management software?

Using a spreadsheet to manage a cap table may seem like a reasonable solution for an initial approach, but down the road it may create challenges for a company; particularly, for growing companies looking to expand, raise new rounds of funding, and hire talent.

What information does the cap table keep track of?

At a minimum, your cap table will display the full list of individuals, institutions and other entities that own stock in your company. For each shareholder, you should be able to see what types of securities they own, how much, when they received their equity and what percentage of the total company they own. If you’re not sure where to begin, we encourage you to leverage this cap table example to get started.

See a cap table example and template

How do I make sure that my cap table is up to date?

Startups are continuously evolving, whether they run funding rounds to support capital needs, or issue stock options to attract talent. With these changes/actions, the cap table also keeps expanding and can become more complex. Managing a growing cap table can be a challenge. To help make this process easier, read our list of tips for managing a cap table.

Here are a few tips for keeping your cap table up to date

Why is it important to keep your cap table up to date?

An incorrect cap table can cause significant issues when seeking investment or hiring talent. That is why cap table management software can be very helpful, as it automates most of the manual work and helps ensure you have an accurate cap table.

Who should manage the cap table?

Does it matter who manages the cap table? While some companies may have a specific person or team that manages the entirety of equity administration, equity compensation management may require cross-functional expertise, including knowledge of legal, finance and HR issues.

How to find a software that fits your needs

Here are five questions you may want to ask when evaluating equity plan management software:

Will the solution help me streamline equity plan management and eliminate manual work?
Will the solution potentially help make it easier to address equity plan financial and legal challenges?
Will the solution easily integrate into my organization?
Is the solution right sized for my business’ needs?
Will the solution help me gain deeper insight into my company’s equity plan?

Read the full white paper for more details