What Is A Cap Table
As a business evolves there becomes a need to manage the Cap Table. A Cap Table, or Capitalisation Table, is a record of the equity structure of the business. It will list all the types of shareholdings from ordinary shares to preference shares, stock options, warrants and even convertible notes if they have been issued. Cap Tables are the first thing that is created when a company is started. It will list out who owns the shares, how much was paid for them and if there has been any dilution over time as new equity is raised. As corporate transactions occur like raising more funding or mergers and acquisitions take place, the Cap Table of a business becomes very complicated.
How To Create A Cap Table
If your are new to managing business equity and want to know how to create a Cap Table then read on. We will provide you with some guidance on what to do and provide you with a Cap Table template which is free to download here. Once you have downloaded your free cap table template, open it up on your computer and follow these steps. i) Click on the tab ‘Cap Table Template’. ii) From here you will need to populate the cells D7 and F7 with the amount of equity contributed initially by the Founders (D7) and the number of shares which were issued to them in return (F7). iii) Now you need to enter in the amount of new equity or capital being contributed by investors in the current round of fund raising. List out each entity or individuals name in cells B16:B25. Then the corresponding contributed value in cells C16:C25.
Cap Table Advice And Management
If you are wondering how to create a Cap Table call us on 0204 501 8085 or email email@example.com. We have cost effective solutions to help you allocate the right amount of equity at the right price to investors and employees. The key behind effective Cap Table Management is to incentivise the right people to support your businesses journey without diluting too much equity. We do this using specialised software which allows us to model different scenarios in order for you to make the best decisions for your business before it is too late! We recommend to all our clients that they engage us before making any changes to the equity and debt structures of their business.
Our Cap Table Management service includes the following:
Common Cap Table Mistakes
The most common mistake we see businesses make when it come to managing their Cap Table is founders or angel investors being diluted too quickly. This is a direct result of not taking the time to undertake cap table scenario modelling based on proposed future funding rounds to help them scale. The end up losing control over business decision making as their share of total equity decreases.
When Cap Tables Become Complicated
The use of options, warrants and convertible debt are attractive sources of funding for businesses wanting to protect equity share upfront. However, to answer the question of how to create a Cap Table which supports the correct balance of ownership structure, you really need to use software to manage this properly. Once options, warrants or debt is converted to equity, this will have a material impact on the equity structure. In the blink of an eye your 25% holding becomes less than 15% overnight. Using cap table software allows you to manage your Cap Table tightly and make smarter business decisions when it comes to bringing in additional shareholders or funds.
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