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What Should Be On My Cap Table?

Helping you build an efficient cap table and decide what should be included or excluded

By altshare Team
August 7, 2023

*This is part two in our article series “Mastering the Cap Table”, click here for part one: who should run my cap table and three: Who’s going to ask for my cap table?

Creating an easy-to-understand cap table is often tricky. Many people, including professional CFOs, tend to fill it with overly complicated information and neglect critical data. The reason might lay in a misunderstanding of the cap table's job and its significant effect on future valuations, inspections, and potential investors.

This article will shed a light on the proper way to set the table. Here you will find a summary of its job and reason to exist, an explanation of what should appear in the cap table, as well as information that isn’t relevant and might overcomplicate things.

Step one - Setting up the cap table

For most founders this should be a step one in general, not only financially wise, setting up a cap table is the way to keep track of the equity to its core. So as soon as there is more than one holder in the company, the shares are distributed and should be recorded in a designated system - AKA the cap table.

There are two ways to create a cap table: the classic spreadsheet, and the intelligent automated. Like the Walkman, although groundbreaking in its era, the spreadsheet cap table is a classic that belongs to the history channel and hardly to the startup nation. The strongest notion of this claim is the fact that most of the important information should be asked when you add the data to an automated cap table. No need to remember anything, just make sure to upload all the necessary information, and you’re done.

What is the necessary information? Here’s the full list:

  • Date of Allocation - including year
  • Amount - keep all amounts recorded in the percentage out of the total
  • Classification - common/preferred, don't forget
  • Round - what funding round each shareholder joined
  • Liquidation preferences - what special preferences shareholders have that aren’t lined with their funding round
  • Warrants - Amount, stock layer name, and classification
  • Allocated Options - Basic data only
  • Unallocated Options - Basic data only
  • Exercised Options - Basic data only

Step Two - Too Much Information
Remember that this cap table should make order in the equity chaos? So there is a thing called too much information, and here, this is the name of the game. Stock options are a great example, the data is important and critical to understanding the flow of the company's future equity. Although important, this information might make the cap table unnecessarily complicated, and excessive. The golden options triangle consists of three important variables:
1. Unallocated options
2. Allocated options
3. Exercised options

As a final note, add a calculation of all this three to see the options pool number, this is important in order to understand how the shares are being distributed when everyone is fully diluted.

This tip has a side note next to it, we always give advice upon our own experience, so for those using altshare’s automated cap table, you will notice information regarding stock options is being asked for running the cap table. The reason is that the system keeps track of all the information behind the stage and updates the cape table accordingly, so the basic information is presented in the actual table but all the data is stored, tracked, and updated when it should affect the cap table.

That being said, one thing needs a human eye from time to time no matter what: data correlations. Make sure the information embedded in the cap table is updated to the recently signed contracts, set regulations, and preferences. Some updates occur so rarely that people often forget to update the cap table, a simple yet crucial thing to do. A wrongly set cap table with false information regarding these qualities might create a huge setback for future valuations and due diligence.

Furthermore, some, tend to add to the cap table results of scenarios they've done, as well as share distribution plans, and theoretical warrants. Those kinds of irrelevant information might derail an investment opportunity as it will create a false picture of the dilution for each investor and might prevent one from investing.

Step Three - Keeping track

Once everything is set, a lot of data will be gathered every now and then, this information should be kept and updated and field out of the cap table. Major changes in the cap table are a good example, the old cap table needs to be stored for future valuations and due diligence. If you use an automated cap table, just download a PDF with the older version and keep going. As it’s possible to just view older versions with a click of a finger, we do suggest saving the older cap tables in a dedicated file, or in a digital data room to make your life even easier.

A digital data room is a place to keep all the papers, documents, contracts, and any information you deemed worthy in one organized hub. It is possible dedicating the information you want to keep to a data room and give access only to those you want any specific data. It is a great way to keep the cap table lean and precise yet file any information desired.

Final notes

Although you are now set to a wonderful start, keeping everything in check is completely up to you. Updating the data in a cap table will not occur so often, the only thing that changes frequently is the stock options section so consider that with every beginning of a workday, or week.

If you're done reading the first chapter in this article series, you already know who should run your cap table. now, no matter who that is, you know what should be in it and how it is supposed to look. Us your well-constructed cap table to move you forward, now you can easily make sense of your equity game, and be hands-on when facing investors, star employees, or an audit team.

To continue your journey in becoming a cap table master, read our next article in this series: “Who’s going to ask for my cap table?”

About altshare

altshare is a leading, fast-growing Equity Management & Compensation Plans Administration solutions provider. We love challenges. We are obsessed with our clients. We are on a mission to redefine the way founders do equity. All our products & services are supported through the altshare Platform - the only equity management platform built for entrepreneurs.

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