Cap Table
A cap table is the record of who owns what in a company — every class of share, every holder, every option, warrant and convertible instrument, with the price paid and the rights attached — and what each would receive at a given exit value once preferences and conversions are applied. It is the first document an investor, an acquirer or a regulator asks for, and the one most startups keep badly.
- Also known as
- Capitalisation table, Capitalization table, Ownership table
- Used at
- every funding round, every option grant, every sale, and the regulator's review of who controls a licensed firm
- Binding
- the shares and rights it records are; the table is a summary of the articles, the shareholders' agreement, the option plan and the instruments, and where it disagrees with them, they win
- Typical contents
- holders; ordinary and each preferred class; options granted, vested and unallocated; SAFEs and convertible notes at their caps and discounts; fully diluted percentages; and a waterfall showing proceeds by holder at a range of exit values
- Typical error
- a table that shows percentages of issued shares while everyone negotiates on a fully diluted basis, or one that omits an instrument someone forgot
- Parties
- the company (its secretary or its lawyers), investors, employees, and the buyer whose diligence rebuilds it from the source documents
How a cap table works in practice
At incorporation the table is two founders and 10m ordinary shares. Each event adds a row or a class: a seed SAFE that will convert at the next round; an option pool of 1.2m shares, 400,000 granted; a Series A of 3m preferred shares at €2.00 with a 1× preference; a bridge note; a Series B preferred class senior to the A. The fully diluted count assumes every option is exercised and every instrument converted, and percentages are quoted on that basis, because that is what each holder will own when the exit comes.
The waterfall is where the table earns its keep. At a €20m exit, the preferred classes take their preferences first — €6m for the A, €12m for the B if senior — and the common shares share what is left; at €100m, the preferred convert and everyone takes their percentage. A cap table that shows only percentages hides the fact that founders with 40% of the shares may receive 10% of a low exit. Investors model this before every round; founders should before every term sheet.
For a fintech the table has a regulatory reader: anyone at or above 10% of the shares or votes is a controller who needed the regulator's approval to get there, and a table that reveals an unapproved controller is a compliance breach discovered by an acquirer.
Example
A payments company's fully diluted cap table: founders 6.0m ordinary (40%), Series A 3.0m preferred at €2.00 (20%, 1× preference €6m), Series B 3.0m preferred at €5.00 (20%, 1× preference €15m, senior), option pool 1.5m (10%, of which 900,000 granted), and 1.5m ordinary held by angels (10%). An acquirer offers €30m. Waterfall: the B takes €15m, the A €6m, and the remaining €9m is shared by the 9m ordinary shares and vested options at €1.00 each — the founders receive €6m for their 40%. At €90m, both classes convert and the founders' 40% is €36m. The table's percentages said 40% in both cases; the waterfall said €6m or €36m, and the founders' decision to accept a €30m offer depended on knowing which.
Common mistakes
- A table kept in a spreadsheet nobody reconciles to the share register, the option plan and the signed instruments. - Percentages of issued shares presented as if fully diluted. - SAFEs and notes left off until they convert, so the founders' true dilution is a surprise at the Series A. - No waterfall, so a term sheet's preference terms are accepted without seeing what they do at a low exit. - A holder crossing a regulatory control threshold through a conversion nobody told the compliance officer about.