A capitalization table, often referred to as a "cap table," is a detailed spreadsheet or document that provides a comprehensive overview of a company's ownership structure. It essentially shows who owns what in a company, detailing the equity ownership of a company’s shareholders and other equity holders.
Key elements usually represented in a cap table include:
Common stock:
These are shares that are often held by founders, employees, and sometimes early-stage investors. Common stock usually carries voting rights but has lower priority than preferred stock in case of liquidation.
Preferred stock:
These are shares typically held by venture capitalists or other investors involved in funding rounds. Preferred stock usually carries certain advantages over common stock, such as priority in case of liquidation and sometimes dividend rights or enhanced voting rights.
Options:
These are usually granted to employees and give the holder the right, but not the obligation, to purchase shares at a predetermined price. Options are a common way to incentivize and reward employees in startup companies.
Warrants, convertible notes, and other forms of potential equity:
These are other financial instruments that could potentially convert into equity under certain conditions.
Equity ownership percentages:
These illustrate the proportion of the company each stakeholder owns, both on a fully diluted basis (assuming all convertible securities are exercised) and on an as-issued basis.
A cap table is an important document for any company with multiple shareholders. It helps provide a clear picture of the company's equity structure, informs decision-making on matters like fundraising and equity grants, and is necessary for legal and financial reporting purposes. As a company grows and goes through more funding rounds, its cap table will become more complex, reflecting the changing ownership structure of the company.
