∞Direct answer
Direct answer
A cap table is a record of who owns your firm. Before a round, list shares, options, SAFEs, notes, and rights. Then map the new shares and the post-round shares. Dilution means old holders own a smaller share after new shares are issued. [1] [3]
Start with one clean ownership record
A cap table shows each holder, share count, share type, and owner share. It can also show options and future-share deals. A SAFE is a contract for later shares. A note is debt that may turn into shares. Keep the signed papers beside each entry. [1]
Check founder names, grants, dates, vesting, and past transfers. A clean record helps an buyer check the firm. Missing data can slow or stop a round. [1]
- Founder and company details.
- Issued shares and share classes.
- Option pool and grants.
- SAFEs, notes, warrants, and their terms.
Use the fully diluted view
Issued shares show what exists today. A all-in view also counts options, warrants, and deals that may become shares. This view can show a lower founder share than the issued view. Investors often discuss a round on this basis. [1]
Do not treat allowed shares as owned shares. Allowed shares are the most the firm may issue under its papers. Issued shares are already granted. Ask counsel which numbers apply to your deal.
- Issued and outstanding shares.
- Unissued option pool.
- Outstanding SAFEs and notes.
- Shares after each possible conversion.
Model the round before you agree
Dilution means an old holder gets a smaller share when new shares come out. The holder may still own the same number of shares. The firm may also be worth more. So share owner share and share worth are other questions. [3]
Model a priced round, option-pool change, and each SAFE or note. Show worth before and after the round. For example, a founder with 8,000 of 10,000 shares owns 80%. If 2,500 new shares are issued, the founder owns 64% of 12,500 shares. This is a map, not a promise of worth.
Ask who bears an option-pool increase. Ask which change price applies. Write down each key fact. A lawyer should check the final papers.
- Shares before and after the round.
- New investor shares.
- Conversion shares and option-pool shares.
- Founder and employee percentages after each case.
Check rights, not just percentages
Equity finance means giving up part of the firm. The buyer fit may bring skill, contacts, and board involvement. Fit matters as much as the cheque. [2]
Review voting rights, board rights, sale priority, right to updates, and sale limits. These rules can affect say and sale proceeds. Their effect depends on the papers and local law. Do not rely on a share alone.
Keep a dated version of the cap table for each signed event. Tell buyers what is known and what is still being checked. Get local legal and tax advice before signing or offering shares.
- Economic ownership.
- Voting and board rights.
- Preference and sale terms.
- Open questions for counsel.
FAQ
Frequently asked questions
What is a cap table?
It is a record of firm owner share. It lists holders, shares, share types, options, and deals that may turn into. [1]
What does share drop mean?
Dilution means an old holder owns a smaller share after new shares are issued. The share count may stay the same. [3]
Should I count a SAFE now?
Model it before the round. A SAFE can turn into into shares later. Its rules can change the post-round shares. [1]
Is a lower share always a loss?
No. A round can add cash and raise firm worth. Percentage, share worth, say, and sale rules need apart checks.
REF
Sources
- 1
- 2
British Business Bank
How equity finance can transform your business ↗ - 3
U.S. Securities and Exchange Commission
Glossary: Dilution ↗