If you are thinking of starting a company, you need to understand the basics about cap tables. This is a term you’ll hear time and time again as a founding member. You’ll even find that you need to use some type of cap table tracking to make sense of it all. First, learn what a cap table is, and how it applies to your start-up situation.
The Basic Definition
Creating a cap table should be the next step after you file for your business license. So what is a cap table? Well, it is a record of capital contributions to your company. Basically, it shows who has given you money to obtain a piece of the ownership. Every cap table will include everyone who has invested in the company. It will also break down their investment amounts and how it relates to their overall ownership. Cap tables will also account for equity and equity dilution. Again, you’re going to need some method for cap table tracking in order to keep the table up to date.
How to Make a Cap Table
When it comes to creating a cap table, everyone does so differently. This is because there isn’t a template, or hard-line rule that tells you how to do it. A cap table can look however you want. However, it has to show all the critical data regarding ownership interests. This will be a big benefit to you as the company grows.
You may want to use an excel sheet to input your cap table information. Part of the sheet will contain the names and addresses of your contributors. The other half will include the amounts given, and the percentages of ownership. This can get rather confusing when you have many different investors. Therefore, you should seek out professional help for cap table tracking. Doing so will allow you to focus on your business.
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