<aside> 💡 Capitalization table – a spreadsheet that outlines a startup's ownership structure, including each shareholder's percentage of ownership, number and type of shares, acquisition price, and other relevant details.

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What is a Cap Table and Why Do I Need it?

The ownership of a company is recorded on a cap table. It records the stakeholders (employees, investors, and founders) and how many shares they each own. As a company raises more money or gives equity incentives to employees, board members, and advisors the cap table becomes more and more developed.

Up-to-date cap tables help investors in their due diligence process to better understand the current ownership structure of your business before they invest. It also helps keep track of equity agreements between co-founders and employees who have an equity-based incentive.

Example:

Structure:

Stakeholders:

The names of people or firms who have equality in the company. This could be founders, investors, employees, or advisors.

Shares:

• Authorized shares are the maximum amount of shares a company is legally allowed to issue to shareholders and is laid out in their articles of incorporation. A company decides this number upon incorporation but can increase this number by amending its corporate charter.
• Issued shares are all of the shares that have been issued to investors. Most often the value of your outstanding shares and issued shares are the same.