Cap Table Template and Examples
In this article we outline the basics of a startup cap table, how a cap table template can look like and what details you need to organize it.
As a startup founder, you know that equity management is important. Efficient handling of equity directly relates to the financial health of a company. Whether to distribute profits among shareholders or to raise sufficient capital from top-notch investors, a startup must demonstrate efficiency in equity management. The best way to do this is to create cap tables at the beginning of business operations.
Cap table Template for Startups
Startups normally maintain cap tables on spreadsheets. It is simple, easy, and can be manually updated. But the spreadsheets have their limitations as well, which are being bridged by sophisticated equity management software in the market. The format however remains the same. Let’s begin with the basics.
What is a startup cap table?
In a startup, a cap table is one of the initial documents created. It is a comprehensive record of the various types of shares issued and their respective shareholders. The usual order of shareholder listings in a cap table template is:
A cap table structure accommodates all classes of securities. Be it common shares, preferred shares, warrants, or the ones issued via ESOP, a cap table records it all. In a startup, an up-to-date cap table is extremely important to steer strategic decisions. Apart from tabulating the ownership structure, a cap table also helps track important events such as stock issuance, stock transfers, cancellation of shares, and conversion of debt to equity across various vesting schedules.
Thus the cap table template of a startup is the blueprint based on which the startup founders, investors, and financial analysts decide on present and future scenarios, like who has the voting right, who deserves how much of the profits, whom to pay first in case of dilution, who should receive dividends – all this information can be derived from a cap table. In the United States, cap tables are used as the only reliable record of stock ownership in a company. Cap tables are also becoming popular in other places in the world as equity becomes more commonplace as a currency in companies, such as countries like the United Kingdom and Germany in Europe or India and Indonesia.
What details should a cap table include?
A simple cap table for startups lists the different types of securities on the X-axis and the names of corresponding shareholders on the Y-axis. Further, the first row always indicates the total number of shares, which is followed by:
- authorized shares,
- outstanding shares,
- unissued shares, and
- shares reserved for employee stock option plans (ESOPs).
Apart from these details, the cap table must tabulate shareholder details separately. This includes information such as:
- names of all shareholders in the company
- number of shares held by each shareholder
- number of stock options owned by each shareholder
- total number of outstanding shares
- total number of available shares
This information makes sense only when updated regularly. Thus a startup cap table template must be robust yet simple. Unless updated with current information, a cap table is of no use to founders and investors. Since the law of the United States permits using cap tables as a legal record of equity ownership, efficient handling of the cap table is also a must.
Besides, the content of the cap table varies with the stage of business. For example:
- At the ‘idea’ stage, startup equity is distributed only between founders. These have straightforward vesting schedules.
- Once the startup is officially ‘incorporated’, more details are included such as the date of incorporation, the total number of shares authorized for the business, number of stocks issued to shareholders including their issue dates and respective vesting schedules, details of founders who have opted for 83b elections and IRS, and the budgeted options pool.
- Gradually the options pool becomes an important factor influencing the cap table. Since startups begin using ESOP for employee recruitment, shares of different classes are issued with varying vesting schedules. A cap table must reflect all of these.
- Finally, as Angels and Venture capitalists start funding the business, this triggers a whole new series of equity calculations. By this stage, the cap table becomes an important document of reference. The best investors rely heavily on a startup with good cap table management practices. A cap table determines the actual ownership structure of a company.
How are cap tables used?
A cap table template in many ways sets the tone to how a startup will fare with future stakeholders, including employees. Here are four basic functions directly impacted by cap tables:
- Employee recruitment – Startups are typically hard-pressed for cash. As a principle, startups divert cash flows towards product development and market research activities in the initial stages. But the company needs the best people on the team as well. Equity becomes the best option in this case. Top talent is attracted with lucrative equity packages along with a below-market salary so that overall, the startup can match their existing remuneration. Employees thus become shareholders in the company. How much an employee owns and how much more can be issued as part of ESOP is information clearly determined by the cap table. With equity management software, it is even possible to grant cap table access to employees to ensure trust and transparency.
- Fundraising – Before funding a startup, investors check for two basic things – the investment history of the company and how it has impacted the ownership structure and their liquidity rank in case they come on board. The first factor informs how many shares are available and how it will affect the investor’s ownership post-money. The second factor determines the order of payout in case of liquidity. Any investor would want to be at the top of this list. Thus an efficient cap table template must be a startup’s priority. Any detail missed out in the initial stages can magnify into a blunder during investment rounds.
- Exit scenarios – A typical trajectory of a startup is to eventually enter an IPO or M&A. Worst case scenario is bankruptcy. Either way, in all these cases, shareholders are entitled to a payback. The order of payouts is determined by the class of shares they hold. But a simple cap table for startups tabulates and maintains these records on a regular basis. Without an up-to-date cap table, no one can determine who should receive how much at an exit.
- Regulatory compliance – In the United States, cap tables are considered as a legal record of company shareholding. Regulatory authorities refer to the cap table to check if all parties are in compliance with equity ownership filings and tax returns.
Cap table template in Excel
A cap table template in an excel sheet is the most basic form of it. It is best suited for startups that can be managed in-house with limited resources. However, as the company grows and more stakeholders get involved in the form of investors and employees, tracking and updating the cap table on an excel sheet becomes a challenge. Here is an example of a cap table snapshot in excel for multiple funding rounds:
Now, let’s take a look at some of the pros and cons of this format.
Advantages and Disadvantages of cap table using Excel
The biggest advantages of creating a cap table template on excel are:
- It can be built from scratch. In case a startup team does not have prior experience in cap table management, this process helps them to learn as they go.
- Startup management can begin with a basic template on excel and based on market research customize details suitable to their business.
- Due diligence in this process will help create a dynamic cap table structure unique for the business.
However, the cap table template in excel is open-source. By design, it has to be manually updated. This has limitations like:
- Manually working on a cap table on excel leaves room for error.
- Unfortunately, the smallest of errors on a cap table can magnify over time and lead to miscommunications with stakeholders causing loss of faith in the company.
- Mismanaged cap tables also affect profit distribution. This can have legal implications for the company.
- Manually created cap tables on excel might suit a startup’s need but it is unique to that company. The format is not standardized. This creates a problem during collaborations. It becomes difficult to streamline information from diverse cap table formats.
- Cap table on excel might be suited for a company in the initial stages, not during their expansion. With multiple funding rounds and ESOP grants, that much information becomes difficult to handle on a spreadsheet.
- Once a company has multiple stakeholders, it must try to be transparent about shareholding information in real-time. This is not possible with excel sheets where all information is available in one go. Customized access can’t be imagined.
Cap table example using Excel
With this basic understanding of the nature of the cap table template on excel, here is an example of how it can be built. Startup founders must keep in mind that any template on the web is only a guideline. It is a great place to start, but founders must look to include specific details that add context to shareholding information in their business. Cap table templates like this serve as a basic overview of how a funding round will breakdown:
Create Cap Table for Your Startup using Eqvista
A simple cap table for startups can be created on excel spreadsheets. However, Eqvista offers sophisticated cap table software that helps all types of companies (seed-stage to pre-IPO) manage their equity needs on a single platform. Read on to explore how startup founders can create a cap table for their business using Eqvista.
Why use Eqvista rather than excel templates to create your startup cap table?
Eqvista is unique software created by experts who have an in-depth understanding of the equity needs of companies in different stages of growth across diverse industries. Ready-to-use cap table templates are available in this software. Startup founders need not take up the added responsibility of looking for a suitable template for their business. Eqvista makes this readily available. Besides, this software also provides a range of equity management solutions such as:
- Issue, track, manage electronic shares across all classes including convertible instruments like convertible notes, KISS, SAFES, and others
- Issue, track, and manage employee stock option plans
- Unified platform for equity accounting needs
- Easy maintenance of equity ledgers
- Efficient vesting plan management
- Real-time cap table management on cloud
- Personalized shareholder portals allowing customized access to the cap table
- Waterfall analysis and round modeling
Unique features of Eqvista
The design and application of a simple cap table for startups has come a long way. As the startup business evolved, so did the toolkit required to run an emerging business. Cap tables are an important part of this package. Eqvista not only supports this but offers these unique features as well:
- Issue Shares – Eqvista software is simple and easy to use. Once a startup client company is onboard, shares can be distributed in minutes. This process is smooth to manage, record, and audit as per regulations. Eqvista supports both certified and uncertified shares and easily issues electronic share certificates.
- Invite shareholders and update in real-time – Eqvista is managed on the cloud. Thus all details are up-to-date in real-time. Shareholders are easily added and can access equity details anytime from anywhere in the world.
- Digitally sign share certificates – Eqvista supports share certificates in all formats. Be it digitally signed share certificates on PDF or electronic shares managed using the book-entry method, Eqvista accommodates all of them.
- Financial Modeling – Eqvista cap table templates are so comprehensive that they lend to two types of important finance models – Round modeling & Waterfall analysis.
- Round modeling – It is a tool that helps startup management to understand the impact of dilution on a cap table. Eqvista is unique in this feature because:
- Startup founders can get instant results on the input of data.
- It allows designing multiple scenarios such as pre-money, post-money valuations, and investment amounts.
- It provides various interest options for convertible notes.
- Startup founders can access informative graph charts with figures under possible scenarios
All these features help startup founders to imagine different scenarios while planning for successive investment rounds. It helps them prepare better in terms of how much investment is needed and how dilution scenarios will impact the company.
The other financial model supported by Eqvista’s equity management software is the Waterfall analysis. This model gives a clear indication as to how much each shareholder will receive in case they exit a startup. This is not an easy scenario to derive manually. It requires complex calculations that might go wrong if tried manually. This is where the expertise of Eqvista comes into play. Some important features of this model on Eqvista are:
- Unlike other models, apart from accommodating common shares and option holders, Eqvista helps design unique waterfall charts for investors during preference share rounds as well.
- It also provides a breakdown of dilution scenarios in the case of preferred investors
- Startup founders can visualize multiple scenarios with varying data using Eqvista’s sophisticated software.
Move your Cap table template to Eqvista system!
In this article we outline the basics of a startup cap table, how a cap table template can look like and what details you need to organize it. A great tool you can use to manage and share your cap table with key stakeholders in your company is an equity management system, like Eqvista.
The details can be changed in real time and collaborated with both company admin and shareholders in an instant. We also provide professional 409a valuations for startups look to find their company value and price per share, which can also be uploaded to the cap table system. Contact us today for more details!