Cap Table
A capitalization table, or cap table, is the official record of a startup's ownership. It lists every shareholder and the number and type of securities they hold (common stock, preferred stock, options, warrants, convertible instruments like SAFEs and notes), maintained as the single source of truth for what each person would receive in a financing, sale, or liquidation event. It's the document that gets pulled, scrutinized, and recalculated at every meaningful moment in a company's life, every financing round, every 409A valuation, every secondary sale, every acquisition, every IPO.
The structure of a typical cap table:
By security type:
- Common stock: founders, early advisors (sometimes), employee restricted stock (rare).
- Preferred stock: investors. Often broken into series (Seed Preferred, Series A Preferred, Series B Preferred, etc.) with different rights per series.
- Options: granted to employees, board members, advisors. Tracked separately from exercised options (which become common stock).
- Warrants: typically issued to venture debt lenders, strategic partners, or as anti-dilution adjustments.
- Convertible instruments: SAFEs and convertible notes, not-yet-converted. Tracked as outstanding until they convert at a priced round.
By stage (typical composition at each milestone):
- Formation: 100% founder common stock (5-10M shares typical, split per founders' agreement).
- Post pre-seed (SAFE): founder common ~85-95%, SAFEs outstanding ~5-15% (not yet converted).
- Post priced seed: founder common ~55-70%, seed preferred ~20-30%, option pool ~10-15%.
- Post Series A: founder common ~38-50%, seed preferred ~15-22%, Series A preferred ~18-25%, option pool ~12-15%.
- Post Series C: founder ~22-32%, all preferred ~50-60%, option pool ~12-15%, others (warrants, advisors) ~5-10%.
- At IPO: founder team 10-20%, institutional investors 50-70%, employees 15-25%, public float TBD post-IPO.
The two views that matter:
Issued and outstanding: shares actually issued. Excludes unexercised options, unconverted SAFEs, unexercised warrants.
Fully diluted: assumes every option, warrant, and convertible has been exercised or converted. This is what investors use to price rounds and what acquirers use to calculate per-share payout. Founder ownership on a fully-diluted basis is always lower than on an issued-and-outstanding basis. See Fully Diluted Shares.
The cap-table-software era:
Through ~2015, most startups maintained cap tables in spreadsheets. Errors compounded over rounds; reconciling at diligence took days. Carta (founded 2012, originally eShares) changed the standard; Pulley, AngelList Equity, and Shareworks followed. By 2020, every venture-backed startup of any meaningful size used cap-table software from formation. Spreadsheet cap tables in 2025 are a red flag in Series A diligence. See Cap Table Software for the platform comparison.
What good cap-table discipline looks like:
- Single source of truth: cap-table software, reconciled to stock certificates and legal documents.
- Every transaction documented: board consent for every grant, every issuance, every transfer. Cap table updated within days, not weeks.
- Modeling forward: before signing any term sheet, run the cap table through the next 1-2 rounds. The cap table you have today is not the one investors price off.
- Pre-financing reconciliation: at every round, counsel reconciles cap table to certificates and consents. Catches errors before they compound.
- Audit-readiness: organized records and software outputs that withstand institutional due diligence.
Worked example: a typical cap table from formation through Series A. Two-founder C-corp with a standard 60/40 split, raising a $3M seed at a $20M post-money valuation, then a $12M Series A at a $50M post-money.
| Round | Founder 1 | Founder 2 | Option pool | Seed Pref | Series A Pref | Founders' combined ownership |
|---|---|---|---|---|---|---|
| Formation (10M shares) | 60.0% (6.0M) | 40.0% (4.0M) | 0 | 0 | 0 | 100.0% |
| Post seed (10% pool created pre-money) | 48.6% | 32.4% | 10.0% | 9.0% | 0 | 81.0% |
| Post Series A (refresh pool to 12.5% pre-money) | 35.0% | 23.3% | 12.5% | 6.5% | 22.7% | 58.3% |
Two things show up in this table that founders consistently miss: First, the option pool refresh at Series A came out of the founders' shares, not the existing investors'. Pre-money pool refresh is the standard ask and it dilutes founders disproportionately. Second, the seed preferred holders went from 9.0% to 6.5% (anti-dilution math at work), but the dollar value of their stake roughly tripled because the company's post-money jumped from $20M to $50M. Founders look at the percentage drop and feel like they lost; investors look at the dollar value and feel like they won. Both are right, which is why the term-sheet negotiation around pre-money vs. post-money pool placement is one of the highest-leverage moments in a financing.
Ryan's Take
The cap table is the only doc in your company where small errors get expensive forever. A founder once told me their cap table was "basically right." It wasn't, and fixing it during a Series A diligence cost them three weeks and a real chunk of leverage. Reconcile it after every signature, not once a year. And model what it looks like after the next round before you sign this one. The cap table you have today is not the one investors will price off of. The discipline that compounds: cap-table software from formation (Carta or Pulley), board consent on every grant, model forward to Series A from day one. The cost is a few thousand dollars a year; the cost of getting it wrong is potentially millions at exit.
What founders get wrong (specific failure mode): A founder issues options to early employees over 18 months using "we'll paper it later" promises. They don't actually have board consents for any of the grants. At Series A diligence, the new investor's counsel discovers ~12 grants without proper board approval. The cleanup requires retroactive board consents, refreshed 409As to defend strike prices, and amended grant agreements signed by every affected employee. The Series A closes three weeks late, the lead investor uses the diligence delay as leverage to push the valuation down ~$5M, and the founder absorbs another point of dilution. Total cost of the cleanup: $50K legal + multiple percentage points of additional dilution. The "we'll paper it later" math never works.
Related: Dilution · SAFE · Convertible Note · Option Pool · Cap Table Software · 409A Valuation · Fully Diluted Shares
FAQ
What is on a cap table?
Every security the company has issued: founder common stock, employee options (granted and exercised separately tracked), investor preferred stock (broken by series), warrants, and convertible instruments like SAFEs and notes, with the holder, amount, and key terms for each.
Who maintains the cap table?
Founder or CFO at early stages, often through Carta or Pulley software from day one. Finance lead or dedicated equity admin at Series B-C. Dedicated team at later stages. Counsel reconciles at every financing. Cap-table software has become essentially mandatory for any venture-backed company.
What is a fully diluted cap table?
The view that assumes every option, warrant, and convertible has been exercised or converted. It's the version investors use to price a round and what acquirers use to calculate per-share payout. Always lower founder ownership than the issued-and-outstanding view.
What's the difference between cap table and cap table software?
The cap table is the underlying record; cap-table software (Carta, Pulley, AngelList Equity) is the tool that maintains it. The shift from spreadsheet to software is essentially universal for venture-backed startups since ~2020. See Cap Table Software.
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