Hey Founder, do you know what a cap table is?

Cap Table - Part 1

This is the first of seven posts from Activate Ventures LLP to help UK startups understand, manage, and build their cap tables. There is a lot to learn so we will be sharing this in bite size pieces. If you are a US startup, we will have cap table posts for you in the future - you may get some insights from reading our UK cap table posts.

The capitalisation table (a.k.a. cap table) keeps track of a startup’s ownership structure. It is typically a spreadsheet in which founders record, or cap table management software:

• the securities (shares, warrants, and share options),

• all company stakeholders who have or may have ownership (founders, executives, investors, former and current employees, future employees, and if applicable, advisors who were paid with equity), and

• the value of the equity.

The cap table is one of the most critical documents maintained by a startup and founders must keep it UP-TO-DATE and ACCURATE from Day 1. The cap table keeps track of:

• total company valuation, including total equity value, share options, and price per share

• how many shares are outstanding, specifically recorded by share class and by each individual shareholder’s name

• pre-money and post money valuations for startups that have raised funding

• equity raised in each funding round, along with the terms of the round

• granted share options, including a list of each individual option holder’s name

• ungranted share option scheme for future employees

• vesting schedules for share options and stock

• warrants

• convertible notes

• authorised shares, if applicable

• Diluted share capital

• Possible returns to each investor class for potential exit values

What do all these words mean? Don’t worry. We will expand and explain all of the above in our future posts.

Next time, we will give you a guide for good practices when managing your cap table.