How to build your cap table & why we decided to automate
Your capitalization table (cap table for short) is a summary of who owns your company. It is an up to date record of shareholders (founders, investors, employees), including:
their shareholding (how much they own)the class of shares they each own in your company,the price and rights associated with those shares
Your cap table is constantly in flux. Imagine, every new hire when you award options or equity in your business, the figures need amending accordingly.
In the case of your investors, they are giving you their money, and it’s your duty to make sure the cap table is well maintained.
Most startups maintain their cap table on bits of paper (bad) or Excel (okay).
The Excel Solution
Try experimenting with this simplified Excel Cap table created by Venture Hacks. (Please note this table does not factor in warrants, vesting, debt interest, liquidation preferences, dividends, the Series B - but is a great learning tool none the less)
The problem is that share classes and their associated rights can get horribly complicated, and between the many changes that get made during deal negotiation and the changes over multiple funding rounds, it quickly becomes an out-of-control monster. And once you’ve lost control of who owns what in your company, well, you’re not going to be able to do your next funding round until that’s sorted.
The Online Solution
Online cap table management solutions provide a great alternative to the Excel route, and will save you hours of work in addition to providing you with a clear table you can add to over time. However they can also require a great deal of manual data entry which will become time consuming. As your business grows, your cap table information we usually be the domain of your Finance and HR teams, who will enter the minutia of your new contracts into the system. Cap table builders such as eShares position themselves to support companies at this stage.
The Automated Solution
At SeedLegals decided to automate data entry for cap table modelling. We designed SeedLegals Cap Table to sync and seamlessly integrate with your company information.
So now, when you give stock options to your amazing new COO, or finalise negotiating a new shareholders agreement with your latest investor.. your cap table updates itself automatically as soon as they sign the agreement. It grows with you as you build your company. You can even grant access to your shareholders so they can see exactly how much their stock is worth at all times.