How to create your first cap table?

This article aims to explain cap table creation with Eqvista’s cap table example.

Investors often request cap tables while they are getting ready for funding rounds. Essentially, a cap table is a spreadsheet or list that summarizes all of the shareholders who have a stake in your business. Seems simple, doesn’t it?

However, this isn’t always true, particularly with subsequent funding rounds. Why? The simplest scenario would be a round-by-round distribution of shares to founders and investors, but transaction structures are often more intricate.

Equity share distribution differs from voting privileges and cash event profits like trade sales or IPOs owing to particular rights and agreements. The need to engage outside experts, such as consultants and attorneys, to replicate the agreed-upon distribution is a common topic of debate during due diligence procedures.

So, it’s wise to pay close attention to the importance of a cap table from the start. This article aims to explain cap table creation with Eqvista’s cap table example.

How to Create Cap Table for Startups

A capitalization table, sometimes known as a cap table, is an essential financial document that details the distribution of ownership and stock inside a firm. Companies seeking funding need a cap table creation to see their ownership structure and potential stock dilution. Simple startup cap tables list shares on the X-axis and shareholders on the Y. Additionally, there are other aspects like:

  • Approved shares
  • Outstanding shares
  • Unissued shares
  • Number of shares set aside for ESOPs

The cap table must independently tabulate shareholder data in addition to these details. This includes:

  • Details of every shareholder in the firm
  • How many shares each shareholder has
  • How many stock options each shareholder has
  • How many shares are currently outstanding
  • Total shares available

Regular updates are necessary for this data to make sense. As a result, a startup’s cap table template has to be both simple and durable. A cap table is useless for leaders and investors if it isn’t kept up to date with recent developments. Since US legislation allows cap tables to record equity ownership, effective cap table management is also necessary.

Why do you need a cap table?

A well-managed cap table can help firms recruit investors and keep their ownership from becoming diluted. It is an essential tool for startups for several reasons. Check out the following aspects to understand the importance of a cap table:

  • Investors are the principal beneficiaries of startups’ cap tables. They predict payments and dilution under specific conditions. Additionally, it reveals the ownership share of the business.
  • All startups need investors to grow. Investors can gauge their influence in negotiations and leverage with the help of a startup’s cap table.
  • Establishing a trustworthy connection between the owner and employees is another benefit of keeping a cap table. Employees may check their stock options and equity interests’ real-time worth via a cap table.
  • If you want to know what factors are necessary to negotiate the present value of your company, go no further than the cap table structure. It helps raise cash and attract investors.
  • Your startup’s legal team may display its assets with precision and organization using a well-managed cap table. The audit team will see your company’s history, which adds credibility to your firm.

What information to gather for your first cap table?

If you want your first cap table to appropriately reflect your company’s ownership structure and equity-related agreements, you must collect thorough information. Here is a rundown of what you need to gather for the cap table creation:

What information to gather for your first cap table

  • Company Information – The most fundamental facts of your business, such as its name, address, incorporation date, and relevant jurisdiction.
  • Founders and Ownership Shares – This section lists the company’s founders’ names, roles, and original ownership shares. Write down any decisions you make about founder share splits.
  • Shareholder Details – List all company owners, such as individuals, businesses, and people who own employee stock options. Compile their names, addresses, phone numbers, email addresses, percentages of ownership, and shareholder agreements.
  • Equity Agreements – Records related to any equity agreement, including but not limited to convertible notes, restricted stock agreements, stock option programs, and purchase agreements.
  • Transaction History – This section contains the company’s transaction history, which includes all equity transactions such as share issuance, stock option awards, equity transfers, and buybacks or repurchases.
  • Valuation Information – In this section, you will find information on the company’s valuation, such as the methodology utilized and the amount of value at different financing phases or milestones.
  • Funding History (if applicable) – Your fundraising history should include details about any funding rounds that have taken place, such as the date, the amount raised, the investors that were involved, and any terms and conditions that were included.
  • Future Plans – A synopsis of the company’s long-term goals and objectives, including projected equity issuances, possible funding rounds, and exit options.
  • Legal and Compliance Documents – Copies of any necessary legal papers, including bylaws, articles of incorporation, shareholder agreements, regulatory filings, and any other pertinent documents related to compliance.
  • Cap Table Management Tools – This section refers to the software and hardware needed to maintain the cap table and any linkages with related systems such as accounting or legal.

Excel vs. Cap Table Software

Whether you use Excel or Eqvista’s cap table software relies on several things, such as how complicated your cap table is, how big your business is, and your specific needs. Here’s a comparison to help you decide:

CriteriaExcelCap Table Software
CostTypically more cost-effectiveMay involve subscription fees
FlexibilityHigh level of customizationOffers advanced features for customization
Ease of UseFamiliar to many usersMay have a learning curve for new users
FunctionalityLimited advanced featuresIncludes automated calculations and more
ErrorsProne to manual errorsReduces errors with automation
AutomationManual data entry and calculationsAutomates calculations and updates
Advanced FeaturesLimited functionalityOffers advanced features like scenario modeling
SecurityBasic security measuresEnhanced security features for sensitive data
ScalabilityLimited scalabilityScales with company growth and complexity
IntegrationLimited integration with other systemsIntegrates with accounting, legal, etc.

Which of these is better?

  • Because of its familiarity and low cost, Excel could be enough for small businesses with straightforward ownership arrangements and few resources.
  • Moving to Eqvista’s cap table software, on the other hand, provides major benefits in precision, efficiency, and scalability when the business expands and the cap table complexifies.

Your company’s unique requirements, financial situation, and projected growth rate will determine the best choice. It is advisable to assess Excel and cap table software solutions to ascertain which is most compatible with your specific needs and long-term objectives.

How to choose the right cap table software?

When picking the right cap table software for your business, it’s important to consider costs, features, how easy it is to use, and how it can be expanded. One cap table software that stands out is Eqvista, which can handle simple and sophisticated requirements.

How to choose the right cap table software

Eqvista’s cap table could be the best option for you for the following reasons:

  • Basic and Easy Cap Table – Cap table administration may be a pain point, but Eqvista makes it easy with its simple UI. Eqvista’s cap table software offers a simple solution for effectively managing your cap table, regardless of the size of your business—small startups or expanding enterprises.
  • Cap Table Management – Eqvista provides effective and safe share recordkeeping by streamlining cap table maintenance. With the all-inclusive Eqvista’s cap table management tools, you can easily monitor ownership percentages, equity transactions, and investor data.
  • Share Management – Easily Manage your shares online by issuing new shares, transferring current shares, and doing a lot more. Eqvista’s cap table makes it easy for all parties involved to communicate and work together, streamlining all shared-related activities.
  • Issuance of Company Shares – A company can easily give electronic stocks to leaders, investors, and other partners through Eqvista. Eqvista’s cap table improves operational efficiency and streamlines the issuing process by doing away with conventional paper certificates.
  • 409A Valuation & Reports – Eqvista offers accurate 409A estimates done by NACVA-certified valuation experts. Businesses can rely on these valuations to appropriately measure their share prices to ensure compliance with legal obligations and gain useful insights for strategic decision-making.
  • Waterfall analysis and round modeling – Advanced tools like waterfall and round modeling are available in Eqvista’s cap table software. These capabilities let users simulate different scenarios and understand how they affect stock ownership, dilution, and valuation.
  • Complex Cap Table – Eqvista can manage complicated cap tables that contain various shareholder arrangements, convertible instruments, and equity classes. The scalability and adaptability of Eqvista’s cap table make it ideal for businesses of all sizes, from fledgling startups to established corporations.

How to build your first cap table on Eqvista?

If you’re a startup looking to streamline your equity management, Eqvista makes your first cap table creation easy. Here is a step-by-step explanation:

  • Sign up with Eqvista – The first step in starting with Eqvista and cap table creation is to sign up for an account on the site. This is an easy-to-follow procedure that just asks for some basic business details. Once you’ve joined, you’ll have access to all of Eqvista’s features and tools that streamline startup cap table administration.
  • Input Company and Shareholder Details – After signing up with Eqvista, you must go to the dashboard and fill out some basic information about your business and its shareholders. At this stage, you must provide details on the people who have a stake in your firm, such as its investors, founders, and others. Your cap table creation happens by precisely entering shareholder names, contact information, and ownership percentages.
  • Allocate Stocks and Equity – Next, you’ll use Eqvista’s user-friendly platform to distribute shares and equity once you’ve entered the business and shareholder data. Eqvista’s cap table creation lets you customize share classes, options, warrants, and convertible notes for your firm. Provide the share class, name, reserved shares, and board approval date for each security.
  • Generate Reports and Scenarios – You will better understand cap table creation and scenario generation once you’ve allocated shares and equity. Eqvista’s robust reporting features help you track ownership, dilution, and valuation via cap table summaries or details. These tools allow you to make smart choices and maintain your company’s equity records correctly.

Create a Basic Company Report on Eqvista

A basic company report contains all of the firm’s major releases. The report details all of the company’s issuances, the primary cap table, and the overall picture. With Eqvista’s company report, you’ll be able to see who owns shares in the company and options, warrants, convertible notes, and common and preferred stocks.

To get a basic business report for Eqvista, follow these steps:

  • Log in and Access Dashboard – Go to your Eqvista account and click on the page for your business. After you’ve logged in, find the “Reports” menu item on the dashboard’s left side.

Log in and Access Dashboard

  • Select Basic Company Report – The “Reports” menu has several other report choices. Select “Basic company report” to learn about shareholders, ordinary and preferred shares, options, warrants, and convertible notes.

Select Basic Company Report

  • Generate Report – To generate a report, choose the “Generate report” option after choosing the basic business report. When you click this button, The system will begin to create the report using the specified data.
  • Download Report – You can download the report in Excel format after it has been created. Click the download link to get the report on your computer, phone, or tablet.

Download Report

  • Access Report – Look for the downloaded file in your browser’s downloads folder or the spot where your device was set to download files before seeing the Access report.
  • Review Report Overview – The first sheet of the downloaded report features the firm name and a summary.
  • Navigate Through Sheets – The report contains numerous information sheets on your company’s equity structure. You may access other sheets in the Excel spreadsheet using the tabs located at the bottom.
  • Review Shareholder Details – The “Shareholders” page lists the company’s shareholders, their positions, establishment dates, and any other pertinent information.
  • Explore Equity Classes – Visit the “Common equities”, “Preferred equities”, “Options”, “Warrants” and “Convertible notes” sheets to learn about each equity class’s issuance, vesting, ownership percentages, and more.

Explore Equity Classes

Secure Your Startup’s Future with Eqvista!

Eqvista has steadily risen to the top of the cap table software market. The tools make it easy for new and experienced business owners to understand and manage their company’s equity because they are thorough and easy to access. Use Eqvista to keep track of your company’s values and cap table!

Eqvista offers a wide range of packages and services designed to meet the unique needs of businesses of all sizes. Our offerings include cap table management and limitless 409A valuations, among others. If you’re starting, our Freemium plan is perfect for you. You can always upgrade as your business grows.

Interested in issuing & managing shares?

If you want to start issuing and managing shares, Try out our Eqvista App, it is free and all online!