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Cap Table

A spreadsheet or software record showing all equity ownership in a company, including shares, options, warrants, and convertible instruments.

Cap Table & EquityFinancial Reporting

FAQs

What is the difference between basic and fully diluted shares?

Basic shares outstanding include only actually issued and outstanding shares. Fully diluted shares include all shares that would be outstanding if all options, warrants, convertible securities, and SAFE/note conversions were exercised or converted — representing the maximum potential dilution. Investors always use fully diluted shares when calculating ownership percentages.

How does a new funding round affect the cap table?

A new priced round issues new preferred shares to investors, which dilutes all existing shareholders proportionally on a percentage basis (though their absolute number of shares doesn't change). SAFEs and convertible notes also convert to shares at the priced round, further adding to the share count. The founding team's ownership percentage decreases with each round.

What is a pro forma cap table?

A pro forma cap table models the company's ownership structure after a proposed transaction — typically a new funding round. It shows the pre-money cap table, the effect of converting existing SAFEs and notes, the issuance of new investor shares, any option pool refresh, and the resulting post-money ownership percentages for all parties.

Related Terms

Dilution

The reduction in existing shareholders' ownership percentage caused by the issuance of new shares to investors, employees, or through conversion of instruments.

SAFE Note

A Simple Agreement for Future Equity — a startup financing instrument that converts to equity at a future priced round, without accruing interest or setting a maturity date.

Convertible Note

A short-term debt instrument that converts to equity at a future funding round, typically with an interest rate, maturity date, discount, and valuation cap.

Equity Compensation

Non-cash compensation in the form of company ownership interests, including stock options, RSUs, and restricted stock, used to attract and retain talent.

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A capitalization table (cap table) is a comprehensive record of all equity ownership interests in a company — common shares, preferred shares, stock options, warrants, convertible notes, and SAFEs — organized to show each stakeholder's ownership percentage and economic rights on a current and fully diluted basis.

A well-maintained cap table is essential for: running investor presentations with accurate ownership representations; modeling dilution from future financing rounds, option grants, or warrant exercises; calculating liquidation waterfall payouts in M&A scenarios; processing exercises, transfers, and repurchases; and filing equity-related tax forms (83(b) elections, 409A valuations, ISO disqualifying disposition reporting).

For early-stage companies, cap tables are often maintained in Excel. As complexity grows — multiple preferred stock series, extensive option grants, convertible instruments — dedicated cap table management software (Carta, Pulley, Capshare, LTSE Equity) becomes essential. These platforms provide legally binding electronic records, automated equity plan administration, and scenario modeling tools.

Key stakeholder categories on a typical startup cap table: founders (common stock, often subject to reverse vesting), employees (ISOs and NSOs issued under an equity plan), early investors (SAFEs or convertible notes at seed stage, preferred stock at Series A+), VCs (preferred stock with full protective provisions), and advisors/service providers (typically small common stock or option grants).

The option pool is a reserved block of shares available for future equity grants to employees and advisors, typically 10–20% of fully diluted shares. Investors often require an option pool refresh before leading a new round, which dilutes existing shareholders pre-money (a factor in valuation negotiations).