A capitalisation table or ‘cap table’ lists the securities your company has issued (e.g. stock, warrants, equity grants, convertible notes) and tells you who owns those securities. The goal of a cap table is to show you ‘who owns what’ in your company.
To help you get the most out of this business-critical resource, we’ll show you:
- Why do you need a cap table?
- What does a cap table look like?
- How to make a cap table for your company
- How to use a cap table
- How to keep your cap table updated
Why do you need a cap table?
If your company has more than one shareholder, maintaining a cap table is essential.
A cap table gives you immediate visibility and clear insight into who owns what in your company. A well-organised cap table can also help you make informed decisions that impact your company’s ownership and equity over time.
Here are the main reasons why a cap table is a must-have company resource.
Cap tables show you who owns what
Think of a cap table as the place of record for the equity-based transactions of your company. Acting as a single source of truth on who owns what in your company, a cap table documents key equity and ownership information like:
- Ownership stakes: who owns what amount of the business, and who needs to sign off on major company decisions (e.g. company sale, reorganization)
- Types of shares: who has common shares, preferred stock, etc.
- Paid-up capital: the amount of money your company has received from shareholders in exchange for shares of stock.
Cap tables make it easier for you to raise money and attract investors
A well-maintained cap table keeps your company’s share and equity information at the ready. This is invaluable in attracting and working with existing and potential investors.
For example, if a new investor requests options that cover a percentage of the company, a cap table can help you answer the following questions:
- Do you have enough shares available in your option pool to meet the offer?
- How many shares are required to cover the requested percentage?
- How dilutive will this grant be to other holders in your company?
Similarly, if you’re thinking about taking on new financing, a cap table can help you run scenarios based on different round sizes and different available option pool targets.
Cap tables help you track investor and optionee data
If an employee leaves your company, their equity stays with them. A cap table can help you track key investor and optionee data, like physical address and non-work email.
You’ll also be able to quickly tell shareholders how much they own.
What does a cap table look like?
There’s no ‘right’ or ‘wrong’ way to make a cap table. The format of the cap table and information it contains will depend on the questions you need it to answer.
Hence, a cap table should be designed in a way that makes it easy for you and your company’s stakeholders to access essential ownership information, such as:
- Shareholder name
- Number of shareholders (current, pending, and previous shareholders)
- Shareholder type (individual, founders, stockholders, etc.)
- Security type (securities owned, e.g. ordinary or preferred)
- Total paid-up capital
Keep in mind, your cap table will evolve as your company grows in size and complexity. This means that the cap table you create today will look a lot different in a few years.
To give you an idea of what a cap table looks like, here’s an example of a cap table generated by Zave.
How to make a cap table for your company
The quickest way to make a cap table is to outsource the task to a qualified agent or corporate governance platform like Zave.
If you’re a whiz with spreadsheets, you can also download a cap table template and use Excel or Google Drive to build your own cap table from scratch.
Work with an online corporate secretary
When you work with an online corporate secretary, they’ll manage your company’s cap table in a cloud-based corporate governance platform like Zave.
With this approach, you have a financial pro overseeing your company’s corporate governance responsibilities, and a cap table that’s secure, accessible, up-to-date, and easy to share with other stakeholders in your company.
Because your cap table is managed by one person (your corporate secretary), there’s zero risk of multiple users creating their own versions of your cap table.
Make your own cap table from scratch
If you’d prefer to take a DIY approach, you can make your own cap table by following the steps in our guide: How to Make a Cap Table.
Just be sure to:
- Assign ONE person to manage the document (ideally your corporate secretary)
- Keep your cap table simple and well-organised
- Make sure your cap table answers the right questions
- Use consistent naming conventions
- Retain stockholder and optionee data (e.g. physical address, non-work email)
You can download our free cap table template to make a basic cap table for your company. This cap table template works as-is. But you can also tailor the cap table template to better suit your company’s needs.
How to use a cap table
Once your cap table is set up, there are plenty of ways you can use it to benefit your company.
Help stakeholders access accurate ownership information
Big decisions like raising funding or expanding your employee option pool can impact the equity structure of your company. When these decisions need to be made, key people on your team will need to know who owns what.
Acting as a single source of truth, your cap table will help you, your stakeholders, and your corporate secretary understand the ownership of your company every step of the way.
When your company starts to raise capital for expansion, investors will want to review your cap table carefully. Not having a well-maintained cap table could be a red flag to potential investors.
Outline initial equity distributions to founders
When you form a business with co-founders, it’s critical that you decide on the initial equity distributions right from the start. A cap table can provide a framework for this planning process and take the heat out of these conversations.
Manage your employee options
Stock options can help you attract and retain employees. You can use your cap table to see you how many options are available for issue and know how many options are already in use.
How do I keep my cap table updated?
The smartest way to keep your cap table updated is to hire an online corporate secretary and have them manage your cap table in a cloud-based platform like Zave.
With your company’s ownership and shareholder information managed in the cloud, your cap table is easy to access and update at all times.
If you decide to DIY your cap table, it’s best to nominate ONE person in your company as the document’s gatekeeper and be vigilant about updating it as your company grows. When multiple stakeholders have access to view and modify your cap table, errors are easy to make, data is easy to delete, and you might end up with multiple versions of the doc.
Whichever approach you choose, your goal should be to have a well-maintained cap table that acts as a single source of truth for “who owns what” in your company.