A cap table, or capitalization table, is a critical document detailing who owns a company. It's essentially a record of ownership, usually in the form of a spreadsheet or table.
Understanding the Cap Table
A cap table lists all the securities and the number of shares a company has issued. This includes:
- Stock: Common and preferred stock.
- Convertible Notes: Debt that can be converted into equity.
- Warrants: Options to purchase stock at a specific price.
- Equity Ownership Grants: Shares given to employees or advisors, often as stock options.
In essence, a cap table provides a snapshot of the company's ownership structure at any given point in time.
Why is a Cap Table Important?
A well-maintained cap table is essential for several reasons:
- Fundraising: Investors rely heavily on the cap table to understand the ownership structure and potential dilution.
- Equity Management: Helps manage and track equity grants to employees and advisors.
- Valuation: Provides insights into the company's valuation based on ownership percentages.
- Exit Planning: Crucial for planning and executing an exit strategy, such as an acquisition or IPO.
