A cap table (capitalization table) is a comprehensive spreadsheet or document that tracks all equity ownership in a company, detailing who owns what percentage, what types of securities they hold, and how ownership has evolved through various funding rounds. This living document serves as the definitive record of a company's ownership structure, including common stock, preferred stock, options, warrants, and convertible securities.
Why It Matters
For angel investors, the cap table determines your actual ownership stake and how it changes over time through dilution. A clean, well-maintained cap table signals professional management and protects everyone's interests by preventing disputes about ownership percentages. When you invest $100,000 for 5% equity, the cap table documents this precisely, and you'll reference it at every subsequent funding round to understand how your stake shifts as new investors come in.
Example
Consider a startup where the founder owns 1,000,000 shares of common stock, representing 100% ownership. An angel investor contributes $500,000 at a $4.5 million pre-money valuation, receiving 400,000 shares of Series Seed Preferred Stock. The cap table now shows the founder with 1,000,000 shares (71.4%), the angel with 400,000 shares (28.6%), for a total of 1,400,000 shares outstanding at a $5 million post-money valuation. Six months later, when a VC firm invests $2 million at an $8 million pre-money valuation, the cap table updates to show the new investor with 20% (500,000 shares), diluting both the founder to 57.1% and the angel to 22.9%. The cap table tracks these changes precisely, including liquidation preferences, anti-dilution provisions, and the employee option pool of 150,000 shares set aside for future hires.
Related Terms
Understanding cap tables requires familiarity with dilution, which describes how your ownership percentage decreases as new shares are issued. The concept connects closely to pre-money valuation, which determines how many shares an investor receives for their capital. Cap tables also track option pools, which are shares reserved for employee compensation that affect all shareholders' percentages.