What is a VC cap table?

A cap table (also called capitalization table) is a spreadsheet for a startup company or early-stage venture that lists all the company’s securities such as common shares, preferred shares, warrants, who owns them, and the prices paid by the investors for these securities.

How do you make a capitalized table?

How To Make a Capitalization Table

1. Valuation: Total cost of your business shares.
2. Total of authorized shares: The number of shares your company is authorized to sell.
3. Total number of outstanding shares: The total number of shares held by all stakeholders in the company.

What is a cap table template?

A capitalization table, or “cap table” for short, is a list of a company’s securities (common stock, preferred stock, convertible notes, SAFEs, options, warrants, etc.) and who owns those securities.

What investors look for in a cap table?

The Cap Table shows how much capital investors contributed and who owns which percentages. If you outsourced any work in exchange for equity, this will also show up on the Cap Table. Investors like to see a complete team with long term incentives to stick with the business.

How do cap tables work?

The capitalization table shows each investors’ equity capital stake in the business, which is calculated by multiplying the share price by the number of shares owned. In most cases, the names of the security owners will be listed on the Y-axis and the types of securities on the X-axis.

Does an LLC have a cap table?

Members of an LLC must produce a cap table before creating other business papers in the early phases of the firm’s creation. Most LLC cap tables are established after a few rounds of fundraising, when the funding sources grow complicated.

Is a cap table legally binding?

Before such trigger events occur, SAFEs and convertible notes are not actual, owned equity. As such, they may or may not be included on a company’s cap table. However, these documents are legally binding, so if a positive trigger event does occur, they should convert to equity and appear on the table too.

Does a cap table include debt?

All debt should be recorded in a section of the cap table. It is helpful to include the following information in the cap table document so you will understand how much equity might be issued to noteholders at some point in the future: Date the debt was incurred. Amount of indebtedness.

What makes a good cap table?

The cap table should show the company’s overall capital structure at a glance, as well as detailed ownership information for each class and series of stock outstanding (see an example at the end of this article). Most importantly, it should always be accurate and up to date.

How does a cap table work?

Do warrants appear on a cap table?

A cap table is a tool used for startups or new businesses to show the ownership of the company. This normally includes common shares, preference shares, options, warrants, convertible notes, and many others. It would have an effect on the founders, investors, employees and other third parties.

Are Cap tables public?

The answer to this question is no. In fact, most companies choose to keep their cap tables private and confidential. Even so, there are several parties within a company that need access to certain information on your company’s cap table.

How do you calculate price per share on a cap table?

It’s quite simple: just divide your pre-money valuation by the total “fully-diluted” capitalization calculated immediately prior to the financing on a fully-diluted basis. That will be the price per share new investors will purchase at.

Why do companies need a cap table?

A capitalization table is a table showing the equity ownership capitalization for a company. The capitalization table is essential for financial decisions involving equity ownership, market capitalization, and market value. Capitalization tables help private companies maintain the calculation of their market value.

Can an LLC have a cap table?

LLCs can use cap tables for a number of reasons, including: Raising money from investors, as the cap table shows how the company is structured as well as past financing rounds. Often, cap tables can answer investors’ questions and let them see how their investments will impact other investors.

How do I read a cap table?

How do you clear a cap table?

The idea behind cleaning a cap table is simple: restructure the cap table so that who owns what can be seen clearly without surfing through pages or calculating things. It should also show the market price and all the equity classes that are there in the company. To restructure the cap table is quite easy.

Is the cap table a secret?

A cap table for startups is one of the most highly guarded documents. It is practically a blueprint of all stakeholder activity in a startup. Stakeholders include founders, employees, advisors, consultants, and investors. All this information is business secrets and must be handled with utmost care.

How is venture capital dilution calculated?

The simplest way to think about this is: If you own 20% of a $2 million company your stake is worth $400,000. If you raise a new round of venture capital (say $2.5 million at a $7.5 million pre-money valuation, which is a $10 million post-money) you get diluted by 25% (2.5m / 10m).

How do you calculate price per share?

To calculate price per share, find the worth of the asset or company, and divide it by the number of shares. Often, the hardest part of this equation will be finding a value for an asset or company. When valuing a company, you need to make sure to include all assets and cash flows.

Does a cap table Show debt?

What ROI do investors look for?

7%-10%
For stock market investments, anywhere from 7%-10% is usually considered a good ROI, and many investors use the S&P to guide their investment strategy. There are other types of investments you can make and those have different expectations, such as: Government bonds can produce a return of around 5%.

What is a VC cap table (capitalization table)?

Before we continue… Download a VC Cap Table model: A VC Cap Table (capitalization table) is created by venture capital partners and their legal teams to provide a summary of the investor and employee ownership in a startup or venture-backed business. In the prior article, we discussed VC Term Sheets.

What is a cap table and how does it work?

A cap table may also rank all stakeholders by ownership percentage, generally from largest to smallest. On a standard cap table, the individual or firm name is listed in one column, followed by their shares in the second column, and then their ownership percentage will be recorded in the last column. The date of investment can also be included.

How do I create a cap table?

Most companies use spreadsheets to create a cap table at the inception of the business. The cap table should be designed in a simple and organized layout that clearly shows who owns certain shares and the number of outstanding shares.

When does the cap table need to be updated?

With each additional round of funding, the cap table requires updating. For example, issuing new shares of an existing security, increasing or decreasing stock options for employees, and issuing new shares of a security requires the cap table to be updated to reflect the changes.