Making a Simple Cap Table
The capitalization table is one of the essential documents investors request from startups. During the due diligence process and before signing a deal, investors would want to know who owns what percentages of the company.
For early-stage startups, cap tables should be fairly simple. Their complexity increases as the startup develops and makes further specific financial transactions.
Here we will show you a fairly simple version of the cap table, for a company that is owned by the founders and a few early investors. If your startup’s ownership is distributed between the founders only and with few investors, this cap table version could be fit for your case.
Simple Capitalization Table
Let’s assume the company had a funding round of $500k at a $1M pre-money valuation. Let’s also assume the founders previously issued 200,000 shares among themselves, before the round. As you can see, all the assumptions are written in blue in the figure.
The purpose of the company valuation table in this figure is to calculate the post-money valuation, the new shares to be issued for the new investors, and their ownership percentage.
In this example, new shares = # of old shares* funding amount / pre-money valuation. 200k * $500k / $1M = 100,000.
With the company valuation complete, we’re now ready to fill the simple cap table. The cap table must state clearly how many stocks every individual owns, the type of the stocks, and the capital provided. Using these items, we can calculate the percentage of ownership for all stakeholders.
Here we assume founders agreed to distribute their shares unequally. Founder A gets 100k shares, Founder B gets 75k shares, and Founder C gets 25k shares.
With three investors participating in the funding round, we need to register the contribution of each of them. We assume they invested in preferred stocks with the stated amounts. Each investor then gets preferred shares proportional to the amount invested.
Finally, the % of ownership column is filled by dividing the corresponding total shares over the sum of the total shares. Note that while the shares owned remain constant, the % of ownership will dilute with newly issued shares.
This simple cap table template is suitable for early-stage startups with similar circumstances. You may also use it to calculate the potential impact of an upcoming funding round.
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