Glossary

Cap Table

Definition

A Cap Table, short for Capitalization Table, is a crucial document that provides an overview of the ownership structure of a company. It displays the ownership stakes and the percentage of shares owned by each investor or shareholder.

Why is a Cap Table important?

A Cap Table is essential for both founders and investors as it helps to understand the ownership distribution and the value of their shares. It provides transparency and clarity regarding the equity structure of the company, which is crucial for making informed decisions and planning future fundraising rounds.

What information does a Cap Table include?

A comprehensive Cap Table typically includes the following information:

  • Investor/Shareholder Names: The names of individuals, entities, or organizations holding shares in the company.
  • Number of Shares: The total number of shares owned by each investor or shareholder.
  • Percentage of Ownership: The percentage of the company's shares owned by each investor or shareholder.
  • Type of Securities: The type of securities held, such as common stock, preferred stock, options, or convertible notes.
  • Share Classes: If applicable, the different classes of shares and their respective rights and privileges.
  • Investment Rounds: The details of each investment round, including the date, amount raised, and any specific terms or conditions.
  • Option Pool: The allocation of shares reserved for employee stock options or equity incentive plans.

How is a Cap Table used?

A Cap Table serves various purposes, including:

  • Fundraising: Potential investors often review the Cap Table to evaluate the ownership structure and the dilution potential of their investment.
  • Valuation: It helps in determining the value of the company by assessing the ownership percentages and the potential returns for shareholders.
  • Equity Management: Founders and management teams can use the Cap Table to track and manage equity grants, employee stock options, and equity-based compensation.
  • Exit Planning: During mergers, acquisitions, or IPOs, the Cap Table is crucial for understanding the distribution of proceeds among shareholders.

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