Optimizing your Company’s Cap Table.

A cap table, short for capitalization table, is a fundamental tool for many early stage founders.   Simply, it provides a clear view of the ownership of a company, identifying who owns what share, the terms by which they own and can be useful in forecasting future outcomes.  

As start-ups or early-stage companies often do not have the capital to compete with larger, more established companies, equity is an important tool to offer key hires, advisors and even partners.    A company’s cap table isn’t static, as it evolves as you grant stock either in the form of common stock or options to employees, raise new financing or raise capital through convertible notes or warrants. 

Similar to managing other back office functions in a company like your accounting, if you don’t start properly it can lead to future problems or at a minimum significant capital to fix prior mistakes.   

In the past, founders typically start by using an Excel Spreadsheet to figure out ownership and future plans. Recently, free cap table software like Carta or Pulley have become increasingly popular, but we still recommend starting out with a basic Excel model. As specialized cap table platforms can quickly enhance your cap table with various tools, yet many founders have made mistakes unknowingly, leading to costly mistakes such as unfulfilled promises to essential stakeholders.

From our experience we highly recommend when you get started to talk to someone who has experience with doing so from a seasoned advisor, to your attorney or other expert such as a Fractional CFO. 

As understanding and being on top of your cap table will allow you to take full advantage of:

• A powerful recruiting tool for high potential candidates. 

• Provide confidence to potential investors or venture capitalists during their diligence of your company. 

• Maintain engagement and affinity throughout your team.