Cap Tables 101: The Startup’s Guide to Cap Table Management
Likely every private company founder understands the importance of the capitalization table: it is an essential record of equity ownership and tool for managing the growth of your business whether you are a startup or mature private company. But not everyone understands the mechanics of how cap tables work and how to best manage them. If you fall into that category, this guide is designed for you. We’ll break down the essentials for owning a cap table, including: an example of a cap table, how to create a cap table, and how to manage a cap table.
What is a Cap Table?
Known formally as a capitalization table, a cap table is a ledger that analyzes a company's equity capitalization. This can include things like:
● The company's percentages of ownership
● Equity dilution
● The value of equity in each round of investment by founders, investors, and others
Put another way, the cap table lists all of your company's securities that have been issued (i.e. stock, warrants, and equity grants) as well as who owns them.
1. What is Cap Table Management (and Why it Matters)?
If you’re completely new to the world of cap table management, this section is for you. We’ll break down what cap table management is and why it is important.
In this section we’ll dive a little deeper into the mechanics of cap table management. We’ll outline the different features and levers you can use and some of the best practices for managing your cap table.
In the last section, we’ll provide a simple cap table template example to help illustrate some of the concepts we’ve discussed in the previous sections.
How Much of this Guide Should I Read?
If you’re looking for a comprehensive overview of cap table management, we recommend reading the entire guide. However, if you already have baseline knowledge about cap and are looking for more advanced information, we recommend reading sections 2 and 3. We’ve tried to make the guide simple to follow and easy to read, so go at the pace that works for you. And as always, if you have questions or want to learn more about how you can calculate stock dilution and manage your equity compensation plan with Shareworks, get in touch with us to receive a tour of the platform.