Stock capitalization table
Create Cap Table Try Demo. Sign in to access your company and securities. Software for company builders. Keep accurate records. Your founders, investors and employees are all co-owners of your startup. Digital stock issuance.
Capitalization Table
This can include things like:. Put another way, the cap table lists all of your company's securities that have been issued like stock, warrants, and equity grants as well as who owns them. Every company needs a cap table because they keep track of who owns how much of your company. Your company can use this information to help decide how you'll manage funding rounds and make major decisions. Here are a few key cap table concepts that will help you navigate the journey from inception to exit.
You probably think of a spreadsheet that looks like this:. In reality, a cap table is made up of many transactions and legal documents. A few examples of these might include:. Cap table management is accurately and effectively managing all these complexities.
This entails drafting and signing legal documents, recording transactions, communicating with shareholders and complying with regulations among other things.
Because virtually any company that turns out to be worth something will naturally progress into a fairly complex capitalization structure. These are all good things, but they add some administrative burden to the already stressful job of growing your company. Modeling new rounds of financing and analyzing the impact on shareholders will be key to negotiating with investors and maintaining a meaningful stake for founders and employees. Your cap table will be at the center of these negotiations, so having everything up to date and accurate is crucial.
They had found an interested investor, but the investor wanted to see the cap table before kicking things off. They contacted us on a Thursday and asked us if we would help them organize their cap table from the dozen or so excel files and PDFs they had been using because the investor wanted to talk on Monday.
After some late nights and a lot of scrambling, we were able to piece together an accurate cap table for them to use in the negotiations.
They successfully closed the round and ended up with a much better deal than they would have had without the organization and insight gained from the cap table. Stock options typically vest over time, so you need to keep track of how many shares have vested for every option grant. If an option holder leaves the company, their unvested options are forfeited, and they have a set amount of time to exercise any vested options before they are also forfeited.
As you can see, issuing options to employees makes cap table management significantly more complex. Plus, all your option expense activity will need to be accounted for on your financial statements under ASC stock expense requirements.
Equity is a big component of hiring and retaining key employees at startups, so being able to accurately lay out a compensation package is critical. Recipients of equity, particularly executives, will want to have an idea of what their payout might be at various exit values if the company sells. More and more companies are choosing to be transparent about the cap table with all employees, not just investors and executives, which means you might have to field questions and inquiries for information in order to retain employees and keep them motivated.
Companies that are honest and organized have a better chance of keeping morale up even during the hard times. If you have the right info and the right tools, your cap table can be a great asset from a human resources standpoint. This is why we built the shareholder portal of startup edition. It gives investors and employees easy access to view their holdings. Seeing options vest and increase in value is a great way to retain talent and motivate employees.
A major part of cap table management is tax and regulation compliance. If you do it wrong, you or your employees could end up paying tax penalties or paying more taxes than you really need to.
This allows them to exercise unvested options into restricted stock so they can start the capital gains clock you have to own stock for at least a year in order receive capital gains treatment.
If all this information is stored in disparate and conflicting records, there will be extra work to determine the correct ownership. Erroneous or incomplete information could result in legal disputes. You can stay on top of everything and avoid costly mistakes by implementing a few best practices.
Most people start managing their cap table in a spreadsheet. It can work fine with just the founders, but it gets old fast.
Having a central repository for all this information helps avoid conflicting records and makes it easy for everyone to access information when needed.
Compliance is pretty straightforward in the early stages, but more and more regulations come into play as your company matures. In connection with keeping all your information centralized, make sure that everyone involved agrees on the accuracy of this information, and that they are informed of changes to the cap table.
The good news is that you can generally learn as you go, and as long as you have the right tools and information, you can stay on top of things and make smart decisions with your cap table. Founders and startup employees have a lot at stake when it comes to their equity, so take the time to understand the legalities and the economics of your cap table. Next to building a great company, your cap table might be the most significant contributing factor in the creation of wealth for entrepreneurs.
Startups have typically shared very little cap table information with employees outside the core management Cap Table Management Issue stock and manage all your equity in one place without spreadsheets. The Shareworks platform can help you manage your equity, taking you from startup to IPO and beyond. Compensation is the most intimate way a company can interact with its employees. For far too long, compensation managers and committees have operated behind closed doors, keeping pay guidelines Equity changes lives.
While it may not be the lowest risk path to wealth, building something from nothing can be incredibly rewarding, both in personal satisfaction and financial outcomes.
The lifecycle of a private company is evolving. Over the last two decades, the timeline for companies to seek an entry to the public market has doubled from 6 to 12 years. In our last article, we described the three present factors that go into the Black-Scholes option pricing model.
A lot hinges on the With all the consistent effort it takes to run a plan well, never mind promote it, uptake in your plan has a way of slipping. But for many startups, the cost is high. Thankfully, you can get a free A valuation and satisfy compliance requirements.
A convertible note is short-term debt that converts into equity, which doesn't force investors to determine the value of the company. Learn convertible notes basics and terms in this blog. If FASB announcements give you In this article, we shed light on How do you convince them to join your company in a competitive hiring market? Why not Growing a company? Hiring, motivating and retaining employees? Preparing your company for an IPO?
Really hard. Finding the right IPO guidebook? Equity administration is Privately held companies on the IPO journey are often curious about promissory notes. As private companies, they can accept these loans as payment from employees to cover the cost of their equity We will be mining the report for lots of ongoing content and blog articles so stay tuned. But this year, we But it was.
And not that long ago, either. Finding a good independent A valuation firm can be difficult, especially with all the misinformation out there. Although we have written the definitive guide to protecting yourself through safe So you are looking to get a A valuation and you are wondering about the A process? We have been performing A valuations for the better part of a decade All rights reserved.
May 19, Shareworks Marketing. Most entrepreneurs know the basics of cap tables… …Or do they? 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 like stock, warrants, and equity grants as well as who owns them.
Cap Tables. Issue stock today and manage all your equity in one place without getting bogged down in spreadsheets and paperwork. Join the platform trusted by over 10, companies, investors and lawyers. Schedule a Demo. Previous Article. Next Article. Learn More. Do I really need an expensive A valuation report to tell me that my startup is worth nothing? Featured Help me manage equity at
A basic capitalization table lists out each type of equity ownership capital, the individual investors, and the share prices. A more complex table. company or early-stage venture that lists all the company's securities such as common shares, preferred shares, warrants, who owns them, and the prices paid by.
Securities include stock, convertible notes, warrants, and equity grants. Cap tables are important because they tell you who owns how much of your company. This can affect everything from how you price future fundraising rounds to who needs to sign off on major company decisions. Cap tables usually include a list of names or groups founders, investors, common stockholders, etc.
A capitalization table or cap table is a table providing an analysis of a company's percentages of ownership, equity dilution, and value of equity in each round of investment by founders, investors, and other owners.
More posts by this contributor Where are all the biotech startups raising? Ride-hailing, bike and scooter companies probably raised less money than you thought. For many entrepreneurs, especially first-time founders, raising outside capital can be daunting.
Cap Table Defined: What Is A Capitalization Table?
This can include things like:. Put another way, the cap table lists all of your company's securities that have been issued like stock, warrants, and equity grants as well as who owns them. Every company needs a cap table because they keep track of who owns how much of your company. Your company can use this information to help decide how you'll manage funding rounds and make major decisions. Here are a few key cap table concepts that will help you navigate the journey from inception to exit. You probably think of a spreadsheet that looks like this:.
Cap tables, share structures, valuations, oh my! A case study of early-stage funding
In the worst-case scenario, it can dilute key people, diminish their future earnings and have an impact on whether your company is attractive to investors or not. In short, the cap table is a list of all company shareholders, the number of shares, share classes and the percentage of shares they hold. To get fully-diluted equity ownership for each shareholder, you will also need to include the option pool you have allocated for key hires and calculate any possible convertible loans you have given out more on what this means later. Two of them own Usually, the founder-CEO is a majority shareholder, alongside one or two other key players. Other founders may have joined after the majority shareholders have already come up with and worked on the business idea, built the product and perhaps own the potential intellectual property IP. The total number of shares is chosen relatively arbitrarily, but a good rule of thumb is to choose a number divisible by the number of founders in this case: , shares, which is divisible by five. If the number of founders is still up in the air it can be a good idea to choose a number divisible by 60, so that it can be divided equally among one to six founders.
A capitalization table is a summary of equity ownership in a corporation. Good cap table maintenance and good corporate governance go hand in hand, so it is critical for corporations to keep their cap table accurate and up to date.
In the early days of your startup, ownership is pretty easy to determine. Even if you raise funding from friends and family, tracking ownership can usually be done in a spreadsheet. It can look something like this:.
Cap Tables 101: The Startup’s Guide to Cap Table Management
Jump to navigation. Note: This article is the second in an ongoing series on valuation and capitalization. Several years ago, I was speaking to a colleague of mine. He was trying to decide between two great job offers, and was having a difficult time making a final decision. When I asked him questions about work environment, the quality of his co-workers and boss, and the future potential for the companies, he responded that both companies fit what he was looking for. Next, I started asking about his compensation package. For salary and bonus, the two companies were equivalent. However, when it came to stock, there seemed to be a big difference. One company offered him 25, shares that vested over a 3 year period. The other company offered , shares that vested over 4 years. Because one offer was almost twelve times greater than the other offer, my friend felt he should take the job from the company that was giving him more shares. His decision was a pretty typical response from someone without much financial experience. So I asked him a simple question. He had no clue what I was talking about.
What is a cap table?
A capitalization table, also known as a cap table, is a spreadsheet or table that shows the equity capitalization for a company. A capitalization table is most commonly utilized for startups and early-stage businesses but all types of companies may use it as well. A basic capitalization table lists out each type of equity ownership capital, the individual investors, and the share prices. Below is one example of a capitalization table. Overall, a capitalization table shows the total market value of a company and its components. As such, it is important for the capitalization table to be accurate, customized to the business needs, and regularly maintained for decision making based on the most current information. A capitalization table is a simple, organized document that displays the total ownership capitalization of a firm. In most cases, the names of the security owners will be listed on the Y-axis and the types of securities on the X-axis. In addition, all holdings of each investor should be in a single row.
