What is a Cap Table?

A capitalization table, or cap table for short, is an ordered list of your companies outstanding securities, including stock, options, warrants, and convertible notes, and who owns them. The cap table has several important roles. Entrepreneurs use the cap table to make decisions that impact the capital structure, such as retaining earnings, equity compensation to executives, share repurchases, or issuances of new securities. A startup company will generally include a cap table in any disclosures to potential investors. This cap table will be used to demonstrate what the ownership structure would look like in various hypothetical investment scenarios. Cap tables will vary greatly in their level of detail. A simple cap table will simply identify the classes of owners (founders, investors) and the classes of shares (common, preferred). The table will depict the numbers and percentages of ownership of these classes. A more detailed cap table will identify the actual holdings of individual owners and investors.

Basic Information in a Cap Table

As noted above, the cap table can be used for varying purposes. No single organization of a cap table is correct. It will depend on how the table will be used. Below is some basic information that should be recorded in the table.

• Stockholder name (or class of stockholder)
• Type of Security (convertible note, common share, preferred share, share class)
• Date of issuance
• Number of shares issued
• Percentage of share issued (and potentially percentage of shares authorized)
• Date of disposition if the security is no longer outstanding.
• Commentary addressing special provisions or concerns for each aspect of information.

Purpose Specific Information in a Cap Table

Your capitalization table should track the purpose of shares identified in the corporate documents. A company that has received investment capital will have one or more classes of preferred shares. These preferred shares generally include provisions granting approval rights for the investors. This normally includes approval of subsequent financing rounds. So, if the charter or bylaws require that a majority of outstanding preferred shares (perhaps from multiple classes of shares) approve a subsequent financing, the capitalization table should include the percentage outstanding for each class of preferred share. This is just one example of how the capitalization table should be modeled to reflect the purpose for which it is used.