What is a Cap Table?

A capitalization table showing who owns what percentage of a company. Critical for fundraising, exits, and managing equity compensation.

Key Takeaways

•Cap table tracks all equity ownership: founders, investors, employees
•Shows both issued shares and fully diluted ownership (including options)
•Essential for fundraising, M&A, and equity compensation decisions
•Must be maintained accurately—errors are expensive to fix

Cap Table Definition

A capitalization table (cap table) is a document or spreadsheet that shows all equity ownership in a company. It lists every shareholder, the type and amount of securities they hold, and their ownership percentage.

For startups, the cap table evolves with each financing round, employee option grant, and corporate action. It's the definitive record of "who owns what."

Example Cap Table

Shareholder	Type	Shares	% Issued	% Fully Diluted
Founders
Jane Founder	Common	4,000,000	50.0%	40.0%
John Cofounder	Common	2,000,000	25.0%	20.0%
Investors
Seed Fund I	Series Seed Preferred	2,000,000	25.0%	20.0%
Option Pool
Unallocated Pool	Options (reserved)	1,500,000	—	15.0%
Employee Options (granted)	Options	500,000	—	5.0%
Total		10,000,000	100.0%	100.0%

Cap Table Components

Common Stock

Basic equity, typically held by founders and employees. Last in line for payouts (after preferred stock).

Preferred Stock

Investor shares with special rights: liquidation preference, anti-dilution protection, board seats. Different series (Seed, A, B) for each funding round.

Stock Options

Right to purchase shares at a set price. Typically vest over 4 years with 1-year cliff. Need 409A valuation to set strike price.

Convertible Securities

Convertible notes, SAFEs, warrants. Not yet shares but will convert to equity (usually preferred) at next financing.

Option Pool

Reserved shares for future employee grants. Usually 10-20% of fully diluted shares. Investors often require pool "refresh" at each round.

Why Your Cap Table Matters

Fundraising

Investors analyze your cap table before investing. Complex or messy cap tables can kill deals.

Equity Compensation

Hiring decisions depend on understanding available option pool and what grants are worth.

Exit Planning

Who gets paid what in an acquisition or IPO depends entirely on cap table structure.

Governance

Voting rights, board seats, and decision-making authority flow from cap table ownership.

Cap Table Mistakes Are Expensive

Errors in cap tables discovered during due diligence can delay or kill deals. Common issues: missing option documentation, incorrect vesting schedules, undocumented oral promises, or equity granted without proper board approval.

Cap Table Best Practices

Use dedicated software: Excel works initially but becomes error-prone. Carta, Pulley, or AngelList Stack are worth the investment.
Update immediately: Add new grants, exercises, and transfers in real-time, not quarterly.
Document everything: Every equity action needs proper board approval and written documentation.
Model future rounds: Understand how next round will dilute everyone before negotiating.
Get regular 409A valuations: Required for option grants; outdated valuations create problems.
Review before fundraising: Clean up issues before investors find them in due diligence.

Frequently Asked Questions

What's the difference between fully diluted and issued shares?

Issued shares are currently outstanding (held by investors and founders). Fully diluted includes all securities that could convert to shares: options, warrants, convertible notes, SAFEs. Investors always think in fully diluted terms because that's their actual ownership after all conversions.

Do I need cap table management software?

Early-stage companies with simple structures can use spreadsheets. But as you add employees with options, multiple financing rounds, and various equity instruments, software like Carta, Pulley, or AngelList Stack becomes essential. The cost ($100-500/month) is worth avoiding expensive errors.

What happens to the cap table in a funding round?

New shares are issued, diluting existing shareholders proportionally. If you have 1M shares outstanding and issue 250K new shares, everyone's ownership drops by 20%. The cap table reflects new investor ownership, updated option pool (often increased), and all shareholders' new percentages.

How do convertible notes and SAFEs affect the cap table?

They don't appear as shares until they convert (usually at next priced round). However, you must track them as 'as-if converted' to understand true dilution. A company might look like founders own 100%, but after pending SAFEs convert, actual ownership might be 70%.

Need Help with Equity Management?

A fractional CFO can help you clean up your cap table, model dilution scenarios, and prepare for fundraising.

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