An equity table, also commonly known as a capitalization table (or cap table), is a spreadsheet or document that outlines the ownership structure of a company, showing who owns what percentage of the company's equity.
Key Elements of an Equity Table
An equity table typically includes the following information:
- Shareholders: A list of all individuals and entities that own shares in the company.
- Share Classes: Details about the different types of stock issued (e.g., common stock, preferred stock).
- Number of Shares: The number of shares held by each shareholder for each class of stock.
- Ownership Percentage: The percentage of the company owned by each shareholder, calculated based on the total number of outstanding shares.
- Options and Warrants: Information about outstanding options and warrants, including the number of shares they represent, the exercise price, and the expiration date.
- Convertible Securities: Details on convertible notes or preferred stock, including conversion ratios and terms.
- Valuation: Often includes different company valuation scenarios, such as pre-money and post-money valuation at different funding rounds.
- Funding Rounds: A record of all funding rounds, including the amount raised, the investors involved, and the price per share.
Importance of an Equity Table
An equity table is crucial for:
- Understanding Ownership: It provides a clear picture of who owns the company and their respective stakes.
- Attracting Investors: Potential investors use the cap table to assess the company's capitalization structure and make investment decisions.
- Managing Equity: It helps the company track and manage its equity over time, especially as it raises funding and grants equity to employees.
- Legal and Financial Compliance: It serves as a key document for legal and financial reporting purposes.
- Planning for Future Rounds: It helps in planning for future funding rounds by demonstrating the impact of dilution on existing shareholders.
Example of a Simplified Equity Table
| Shareholder | Share Class | Number of Shares | Ownership Percentage |
|---|---|---|---|
| Founder A | Common Stock | 5,000,000 | 50% |
| Founder B | Common Stock | 3,000,000 | 30% |
| Angel Investor | Preferred Stock | 1,000,000 | 10% |
| Employee Options | Common Stock | 1,000,000 | 10% |
| Total | 10,000,000 | 100% |
Tools for Managing Equity Tables
Several software tools are available to help companies manage their equity tables, including:
- Carta
- Pulley
- eShares
These tools offer features such as automated calculations, scenario planning, and secure data storage.
In summary, an equity table is a vital document for any company, particularly startups, as it provides a clear and comprehensive view of the company's ownership structure, facilitating investment, equity management, and legal compliance.
