Well, if you are doing a startup, your capitalization table, fondly known as your Cap Table, determines how much you, your employees and your investors get rewarded at the end of the game. So, it’s important. It’s also an annoying form of accounting. If you are bootstrapping, it is essential to make sure all the founders receive what they thought they would. If you are raising capital from angel investors or venture capitalists, it is absolutely critical as you can’t take investor capital until your cap table is in perfect shape! To help, I’ve brought together several resources for you to help you navigate this essential but challenging part of building your company!
- Summary of Cap Table Issues
- Cap tables are not crucial for early-stage equity allocation among founders, but an accurate cap table is essential when raising money from different investors at varying valuations and incorporating employee options. So I recommend starting with a cap table at day one! See our earlier post on allocating founder equity including considering the Slicing Pie system.
- It is important to clarify whether valuations, for both investors and employees, are pre-money or post-money, as this can significantly impact ownership percentages.
- When offering employees stock options, it is important to be fair, and preferably generous, but essential to protect the company and the founders and investors as well.
- To do so, make sure to follow best practices for equity allocation to executives and employees, including benchmarking against industry standards and avoiding excessive dilution, particularly for the first 50 employees.
- Example Cap Table Templates – Downloadable to get you started
- Download a simple Cap Table Template – CooleyGO
- Simplify equity management with free cap table template – Carta (registration required)
- The AVC Cap Table Template – From AVC Fred Wilson
- The U.S. Department of Energy did a webinar discussing cap tables and I thought it would be helpful to you. You can watch it below embedded below or on our YouTube Channel.
Your Cap Table, determines how much you, your employees and your investors get rewarded at the end of the game. So, it’s important.
So why do cap tables matter? Because they show who gets what. I’ve covered the founder issues around equity in a couple of posts that might be interesting to you.
If you are looking to raise capital in this market, I strongly encourage you to get help! Don’t go it alone!
We have lots of NO COST content on our blog, as well as our modestly priced resources on Capital Raising Coaching and Potential Investor Identification – “Designing the Perfect Investor™” and “InvestorFind™ Investor Identification Support“.
For Resources to help you on your capital journey, see our Resources page!
In addition, if you are interested in Individual Coaching see our offerings on CEO and Entrepreneur Coaching. If you’d like more details, email venturewrenchcommunity [at] gmail.com.
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