Capitalization Table

How to Read a Capitalization Table:

A capitalization table (cap table for short) shows how ownership of the company is distributed among all shareholders after each round of investment. It also shows exactly what classes of stock exist, and who owns how many shares (and what percentages) of each. The rows are labeled with all classes of shareholders, grouped into two general categories: common and preferred. The body of the table appears in groups of three columns; each group of three columns corresponds to equity ownership at a particular time, or more specifically just after an investment round. The first group shown corresponds to equity distribution immediately after the founders' round. The second group shown corresponds to equity distribution immediately after the first major investment round, and so on. Within each group, the three columns are as follows:

  • Shares. The number of shares that this class of shareholder has been issued.

  • Percent undiluted. The percent of total outstanding shares that this class of shareholder's shares represent. Thus, if this shareholder owns 250K shares, and 2M shares are currently outstanding (i.e., are owned by all shareholders), the percent undiluted will be shown as 12.5% (250,000/2,000,000 = 12.5%).

  • Percent (fully) diluted. At this time, a certain number of options have been authorized to be granted to individuals. If all these options were to be granted, and all option holders were to exercise their right to convert those options into shares, additional shares will exist. When we include these shares in the overall count of shares, we call the new count (fully) diluted. Thus, continuing with the above example, if a pool of 1,000,000 shares have been authorized for options, then the shareholder will own 250,000 shares out of a total diluted pool of 3,000,000 shares (i.e., 2,000,000 shares sold plus 1,000,000 options authorized), then his/her percent diluted will be 8.3% (250,000/3,000,000 = 8.3%).

Why does my cap table show just one round of investment?

What is a good equity distribution?

How many options will my employees be granted?

How can I grant fewer options?

How can I grant more options?

I want more control. What can I do to give more equity to founders?

What's the difference between diluted and undiluted percentages on a cap table?

Why do I need a founders' round?

What is the right timing for investment rounds?

What is the difference between an Incentive Stock Option (ISO) and a Nonstatutory Stock Option (NSO)?

Let's say I am looking at a Series B entry in the cap table. Can I assume that these are my “post-money cap table” for Series B and the previous three columns shown here are my “pre-money cap table”?

Well, almost! When one uses a cap table to examine the effects of a particular investment round (like Series B in the case of your question), the number of granted options in the “pre-money cap table” are updated to be identical to the number of granted options shown in the “post-money cap table.” As a result, the total number of fully diluted shares in the pre- and post- differ only by the number of shares being sold in the investment round.

Because we are using the cap table here during the planning stage of your company to show the overall effects of all your investment rounds, we've chosen to show in each round the number of options granted at the time of that round.

I don't plan to have investors. Does my cap table tell me anything?

It won't tell you much. But just for confirmation, it should show that the founders and option holders own 100% of the company.

I have not granted any options. Why does my cap table show options?

By default, Offtoa assumes that you have a board of directors and that they are granted options. If you want to change this, click on assumptions/financing/investments/options. Then change either the number of board members or the percent of option pool granted to each board member.

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