Skip to content
× FreshBooks App Logo
FreshBooks
Official App
Free - Google Play
Get it
You're currently on our US site. Select your regional site here:

What Is a Cap Table? Definition, Overview & Examples

Updated: November 25, 2022

Any aspiring entrepreneur must have a comprehensive understanding of who controls what at every level of the company. This is valid whether you’re conducting research to raise capital or are just creating a new company.

The capitalization table, often known as the cap table, gives you the details you need to determine who owns what percentage of your business.

Read on as we find out exactly what a cap table is, how to use it, and how to maintain one.

List IconTable of Contents


    KEY TAKEAWAYS

    • A capitalization table is a tool used by startup companies to track the company ownership of their equity.
    • The cap table lists the names and contact information of each shareholder. This includes the number of shares they own and the value of those types of shares.
    • The cap table is an important tool for startups because it helps them keep track of who owns what in their company. 
    • The cap table is also a useful tool for startup employee stock options. It can help them understand how much personal ownership they have in the company.

    What Is A Cap Table?

    A cap table is a document that lists all of the shareholders in a company, as well as their corresponding ownership stake. It’s an important tool for startups and early-stage companies. It can help understand ownership breakdown. It’s also useful for seeing how much each shareholder would receive if the company were to sell or go public.

    Put Your Books On Autopilot

    How To Make A Capitalization Table?

    To make a capitalization table, you’ll need to list the following information for each shareholder: 

    • Name
    • Number of share options owned
    • Share price
    • Classification of common equity shares (or preferred)

    You can use a tool like equity dilution calculator to get a more accurate picture of each shareholder’s ownership stake. Once you have all of this information, you can then calculate the percentage ownership stake for each shareholder. 

    Once you have this data, it’ll be easier to make major company decisions. If you need help with complex table creation, look into cap table software. Many provide a table template that simplifies creation.

    How To Use A Cap Table?

    There are a few different ways to use a cap table. The most common way is to use it as a tool for keeping track of ownership stake.

    Another way to use a cap table is to calculate the dilution rate. This is the percentage of value lost by existing shareholders when new shares get issued. To calculate the dilution rate, you’ll need to know the number of shares outstanding, the share price, and the total value of the company.

    You can also use a cap table to calculate the equity split. This is the percentage of ownership that each shareholder has in the company. To calculate the equity split, you’ll need to know the number of shares outstanding and the total value of the company.

    The equity ownership capital table is a tool used by startup companies to track the legal ownership of their company’s equity. The cap table lists the names and contact information of each shareholder, the number of shares they own, and the value of those shares. 

    The equity ownership capitalization table is an important tool for startups. It helps them keep track of ownership calculations. Knowing the current ownership percentage gives you a clearer picture of equity ownership.

    How To Maintain A Capitalization Table?

    There are a few different ways to maintain cap table management. The most common way is to use a tool like equity dilution calculator. This will help you keep track of the number of shares outstanding, the share price, and the total value of the company.

    Another way to maintain a cap table is to use a spreadsheet. This can be helpful if you want to track additional information. I.e., the number of shares owned by each shareholder, the classification of shares (common or preferred), and the dilution rate.

    No matter how you choose to maintain your cap table, it’s important to keep it up-to-date. In doing so, you can make informed decisions about your company’s equity.

    Cap Table Example & Template

    If you’re looking for a cap table example or template, it needs to include the following information:

    • Number of shares outstanding
    • Share price
    • Total value of the company
    • Classification of shares (common or preferred)
    • Dilution rate
    • Equity split

    Your template can serve as a starting point for your own cap table. You can add new information, such as the number of shares owned by each shareholder, to make it more specific to your company.

    Analyze Your Finances

    Why Are Cap Tables Important?

    Cap tables are important for a number of reasons. The most obvious reason is that they can help you keep track of who owns what. And how much each shareholder would receive if the company were to sell or go public.

    Another reason why cap tables are important is that they can help you calculate the dilution rate. This is the percentage of value lost by existing shareholders when common share transactions get issued. To calculate the dilution rate, you’ll need to know the number of shares outstanding, the share price, and the total value of the company.

    You can also use a cap table software to calculate the equity split. This is the percentage of ownership that each shareholder has in the company. To calculate the equity split, you’ll need to know the number of ordinary shares outstanding and the total value of the company.

    A cap table is primarily used by startups and early-stage companies to keep track of ownership. This information can be valuable in a number of different situations, such as:

    Dilution Analysis: A cap table shows you how future equity dilution will impact existing shareholders.

    Fundraising: If you’re raising money from investors, they’ll likely want to see your company’s cap table.

    Exit Planning: If you’re planning to sell your company, the buyer will likely want to see the cap table to understand who the major shareholders are.

    There are Excel-based cap tables if you need help with your table model and other critical documents.

    Summary

    A cap table is a tool that startups and early-stage companies use. It enabled them to keep track of who owns what, among other things.

    The most important information in a cap table is the number of authorized shares outstanding, the share price, and the total value of the company.

    Remember, you need the right data on your cap table to gain an accurate picture of shareholder information. Be sure to refer to the outline above to see what you need in your cap table. And don’t hesitate to use cap software to make the creation process easier.

    Today's Numbers Tomorrow's Growth

    Cap Table FAQs

    How do investors share cap tables?

    One way that investors share cap tables is by using a tool called a shareholder register. This is a tool that allows shareholders to view, edit, and update the cap table in real-time. Another way is by using a tool called a virtual data room (VDR).

    Is a cap table confidential?

    Yes, a cap table is usually considered to be confidential information. This means you should only share it with shareholders and prospective investors who signed an NDA.

    What is a good cap table?

    There is no definitive answer to this question, as it depends on the individual company and its shareholders. However, a good cap table should be accurate, up-to-date, and easy to understand.

    Why do investors want cap tables?

    There are a few different reasons why investors might want to see a company’s cap table. The most common reason is to understand the ownership structure of the company. Another is to see how much each shareholder would receive if the company goes public or gets sold.

    What is a reverse split?

    A reverse split is a corporate action that reduces the number of shares outstanding. This often happens when a company’s stock options are below a certain level. So the company wants to boost the price by reducing the number of share transactions.

    WHY BUSINESS OWNERS LOVE FRESHBOOKS

    553 HRS

    SAVE UP TO 553 HOURS EACH YEAR BY USING FRESHBOOKS

    $ 7000

    SAVE UP TO $7000 IN BILLABLE HOURS EVERY YEAR

    30M+

    OVER 30 MILLION PEOPLE HAVE USED FRESHBOOKS WORLDWIDE

    Try It Free for 30 Days. No credit card required. Cancel anytime.