GENERAL INTRODUCTION TO CAPITALISATION TABLES
A capitalisation table offers a breakdown of the shareholder equity that a company has. These tables or spreadsheets are known as cap tables and are commonly used by start-ups. Included in the cap table is all of the company’s equity ownership capital such as convertible equity, warrants and common equity shares.
HOW TO UNDERSTAND A CAP TABLE
A capitalisation table may seem complicated but they are fairly simple to interpret. Essentially, they list out every type of equity ownership capital, with the share prices and investors. Complex tables may also have information on possible new funding sources, public offerings and acquisitions and mergers.
These tables are often used by private companies to show information on their investors and market value. It is a key reference tool for business managers as it is used in every financial decision that could have an impact on the market value of the company.
DO YOU NEED A CAP TABLE?
Cap tables should be used by all entrepreneurs who want to keep on top of their equity ownership capital. Decisions around capitalisation are constantly being made and a cap table allows you to keep track of this and weigh up decisions. It is essential that you keep your cap table simple and neat.
It should include the stockholder name, the date of issuance, the date of disposition, the number of shares issued and a worded commentary. It will show each investor’s stake in the business, which is worked out by multiplying the share price by how many shares are owned.
UPDATING A CAP TABLE
As your company evolves and changes you will need to constantly update your cap table. If shares are sold, new shares are issued or the option pool is increased, this should be recorded in the table. But how to anticipate what the cap table will look like in the future?
DOWNLOAD OUR CAP TABLE TEMPLATE
You can model how future rounds will look like and how the capitalisation table will change two or three rounds ahead. You can even input the terms and conditions an investor is putting forward to understand their impact in a down round and in different circumstances. Download our Cap Table here.