Summary: A cap table lists who owns what in a startup. It calculates how the option pool shuffle and seed debt lower the Series A share price. This post includes a fill-in-the-blank spreadsheet you can purchase to create your own cap table.

A capitalization (cap) table lists who owns what in a startup. It lists the company’s shareholders and their shares.

This screencast walks you through our cap table:



The cap table is free

We used to charge for the stuff but now it’s free.


“This is great; we (probably like many other entrepreneurs) tried our hand at hacking up a similar spreadsheet on our own but this is a far more flexible and easy way of visualizing various scenarios. Thanks for putting this together.”

– Drew Houston, Founder of Dropbox

The cap table shows you what you really own

Many entrepreneurs think their pre-money valuation determines their percentage ownership of the company. They forget about the option pool shuffle. They forget about seed debt and its discount. Then they blame their lawyers.

Use this cap table to sketch out how much you will really own after the financing. Find something else to blame on your lawyers.

This cap table is simplified

Our cap table includes the major economic levers of a Series A: common stock, preferred stock, options, and convertible debt. It doesn’t include warrants, vesting, debt interest, liquidation preferences, dividends, the Series B, et cetera.

Cap tables can be a little tricky to understand if you’ve never worked with one before. So we kept it simple.

Your lawyer or accountant will deal with the details that aren’t included in this cap table. They will maintain the company’s official cap table.

Disclaimer — read this

Use this spreadsheet to learn more about cap tables and what your cap table might look like. Then hire a lawyer to maintain the company’s official cap table.

This cap table is provided as-is, with no warranties. It is not legal advice. We make no representations that this cap table is accurate in any way or is fit for any purpose.

We do not take responsibility for anything that results from using this cap table, including, but not limited to, losing all your money and going to jail.

We are not lawyers. Get a lawyer.

Do you have any suggestions or questions?

Please leave your suggestions and questions in the comments and we’ll improve the cap table.

Topics Convertible Debt · Option Pool · Valuation

28 comments · Show

  • Drew Houston

    This is great; we (probably like many other entrepreneurs) tried our hand at hacking up a similar spreadsheet on our own but this is a far more flexible and easy way of visualizing various scenarios. Thanks for putting this together.

  • Anonymous

    Does this mean that the number of shares (in the example 2m) that each of the founders has would remain unchanged even after IPO?

    I mean, are there other events at which more shares are allotted to the founders ?

    And how and when should this number of 2,000,000 be decided ?

    Is it decided keeping in mind what the target share value should be ?

    • Nivi

      I’m not an expert on very late stage or post-IPO matters so I can’t comment on additional option allocations at that stage.

      Prior to the IPO, founders or key management may be issued more shares if they have been overly-diluted over time. The investors want to keep the founders/management highly motivated.

      But this is more likely in a down round or a recap. This is not likely if the valuation is monotonically increasing.

      We picked 2M shares because we wanted the share price to be approximately $1. The exact number of shares is not relevant as long as they are sufficiently granular, e.g. each share isn’t worth $10,000. You need to be able to give out shares without giving away $10,000 at a time.

      There may be some other legal niceties associated with the number of shares—ask your lawyer.

  • Yokum Taku

    I think the formula in your spreadsheet for calculating price per share is a bit too complicated for an entrepreneur to proof.

    As you are aware, your formula basically means

    = [(premoney valuation) – (value of option pool top up shares) – (value of bridge loan)] / (premoney common and options)

    I don’t think that this is particularly intuitive or the way most people would conceptualize how you get to price per share.

    I typically set up spreadsheets on the price per share to be:

    = (premoney valuation) / (fully diluted premoney shares including option pool top up and bridge conversion shares)

    I would suggest revising cell D2 as

    =B3/(C17+C19+C15)

    which written out would mean

    = (premoney valuation) / [(premoney common and options) + (option pool top up) + (shares issued upon bridge conversion)]

    You then need to turn on iterations in tools, options, calculations — since the option pool number and the bridge conversion shares number needs to iterate to get into the fully-diluted share number to get into the price per share calculation. I assume that you wrote the formula the way you did to avoid the circular reference.

    There are, of course, lots of additional bells and whistles that one could add (taking into account how the liquidation preferences work (participating/non-participating/cap) and whether options get exercised if they are in the money or not), but probably too complicated for the average user.

    We build custom spreadsheets to plan for M&A outcomes where you can enter the sale price, and we calculate on a shareholder by shareholder (and optionholder) basis (or at least a class/series of stock basis) exactly how much (net) money they get. We add if/then formulas to determine automatically whether it is economically beneficial for an optionholder to exercise their option. In other words, if you put in a low liquidation price, then the price per share to common might end up being below the option exercise price (and the spreadsheet is smart enough to figure it out). For example, for a non-participating preferred, there is a finite pool of money left to go to the common, and whether options are exercised or not will affect the price per share to common (which is a circular formula).

    We also build spreadsheets to model the effect of a “down” round financing and how the anti-dilution adjustment results in more pre-money shares, which drives the price per share down (which is a circular formula).

    This is why I expect potential paralegals that I hire to have strong math skills.

    I liked the video.

    • Adam

      Sounds great Yokum. Why don’t you post your xls here to help out the community of entrepreneurs.

      Adam

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  • Scott

    Does anybody have a good spreadsheet for a cap table that has gone through several rounds of financing (debt and equity) and goes into a bit more detail than the basic one provided here? I am referring to some of the more complex additions that Yokum is speaking of. If not, any good resources that explain how to build and take such things into account?

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  • Scott Oppliger

    Guys — I just purchased your cap table and started plugging my numbers in. In my mind I had been considering the pre-money option pool and the post-money option pool to be one number (10% for example). In our case, we have four founders and based on our hiring plan only need 5% options for the next 12-18 months for future hires. I’ve plugged in 5% as the post-money pool but am a bit confused about the relationship between that and the list of pre-money options on the second tab. I found myself setting up Employee 1, 2, 3, etc. options, trying to add up to the same 5%. Can you correct my thinking?

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  • Daniel Gross

    Found this super useful – really clarified to me what the hell was going on.

    Thanks for setting this up!

  • JH

    I put together a cap table with multiple rounds using your base model and expanded it for later rounds. Want to upload it so that you/others can check/critique and use if correct. Any suggestions as to where I can upload it?
    Thanks much in advance.

  • Jeff Gould

    Nivi –

    Anything that is accurate and inexpensive is great for helping entrepreneurs as they begin to understand how their cap table is built, so thanks for offering a $9 starter set. As you mentioned, there is a great deal of complexity as you mix in the various features of preferred stock (redemptions, accruing dividends, liquidation preferences, participation, etc.) and securities such as warrants, SARs, restricted stock, options and convertible debt.

    When companies raise millions of dollars, they need a robust solution that handles all these securities, keeps the company ready for due diligence and provides the ability to model multiple financing strategies and scenarios.

    If you’re at that point, come see what we’re doing at capcontrols.com. Let us know if we can help you.

    Jeff Gould

  • Anonymous

    I purchased the 3 pack and never received it. Help!

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  • Tyler

    Hi,
    I have 3 founders and I’m wondering how to proceed with adding that row while avoiding messing up all the calculations etc…

    Thanks!

  • Rob Mathewson

    I’m using version 0.9 of the Cap Table. Is there a more current version?

  • Sarah

    I purchased the three set and havent received it, help?

  • Sarah

    I have it now! thanks so much.

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  • Adam

    This is awesome–thanks for ptting it together!

    One note: I understand why you wouldn’t include the option pool top-up in the effective pre-money valuation–it’s a good way of pointing out the significant founder dilution that can be caused by semi-arbitrary option pool goals–but shouldn’t the seed debt be included? The fact that some seed investment is done as debt instead of equity doesn’t negate the fact that part of the company effectively gets sold off.

    To put this slightly differently: it seems like the real value of the “effective pre-money valuation” cell is to give an apples-to-apples comparison between a VC valuation and a (likely theoretical) acquisition offer. The right valuation to compare to an acquisition offer would include the the seed debt, which would convert at an acquisition.

  • Anonymous

    Sorry for reposting ):
    Angellist is a dream come true. I have a few questions
    Can anybody pls respond with a bulleted response to my questions.

    What does a sample of terms of the deal look like.? A generic sample is fine.

    Is it simply writing we are raising 200k for 20% of the company or is it more than this?

    I have also read about angels sending term sheet and startups preparing and signing terms sheets before approaching investors. I’m a bit confused who should prepare term sheet. Investors or startups?
    At what point are all these necessary in the process?

    Our long term raise is $1m in the next 24 months. Can we indicate this on startup profile or just say we are raising 200K now?

    Sorry don’t know all the financing terms

  • Darren

    I thought I’d share a simple Cap Table we’ve put together using our online spreadsheet app called Sumwise.

    It lets you model multiple rounds of financing with multiple investors, and shows you the changes in percentage shareholding, return on investment, etc.

    It’s easy to use, doesn’t require a download (runs best in Chrome, not at all in IE yet), and it’s free!

    We’d appreciate anyone trying it out and giving us some feedback.

    You can find it here: http://www.sumwise.com/templates/capitalization-table

    Cheers
    Darren

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