A capitalization table, also known as a cap table, is a document that shows the equity capitalization for a company. It is a ledger that tracks the equity ownership of a companys shareholders, including how its capitalization is composed. Cap tables are used to provide an analysis of a companys percentages of ownership, equity dilution, and value of equity in each round of investment by founders, investors, and other owners. They are most commonly utilized for startups and early-stage businesses, but all types of companies may use them as well.
Cap tables are important because they tell you who owns how much of your company, which can affect everything from how you price future fundraising rounds to dilution of your ownership percentage to who needs to sign off on major company decisions. Accurate cap tables also play a major role in due diligence for potential investors or venture capitalists who are considering investing in your startup.
Cap tables often include all of a companys equity ownership capital, such as common equity shares, preferred equity shares, warrants, and convertible equity. They can become highly complex after several rounds of financing. Cap tables can be created and managed in multiple ways, including using a cap table template or free cap table software.
In summary, a cap table is a document that details who has ownership in a company and is used to track the equity ownership of a companys shareholders. It is an important tool for startups and early-stage businesses to manage their equity structure and make informed decisions about future fundraising rounds.
