If you plan on issuing stock, convertible notes, warrants, or equity grants, you’ll need a cap table to track everything. A cap table is a list of all the securities your company has issued and who owns them.
It’s important to have an updated and organized cap table so you:
- Know how to price future fundraising rounds
- Can get reasonable and accurate 409A valuations
- Know the amount of shares remaining in your option pool
- Can easily tell shareholders how much they own
- Can forecast potential payouts and dilution and share with investors
- Know who needs to sign off on major company decisions
When creating a cap table, keep in mind that there’s no standard format, and there are multiple ways to build one.
Option #1: Build one from scratch
If you love Excel or don’t mind getting your hands dirty, it is possible to build a cap table from scratch. However, it’s not a great long-term solution, and why reinvent the wheel?
Pro: You can build it to your specifications from the start
Cap tables can look different depending on what type of information you’re trying to track and the questions you’re trying to answer. By building your own cap table, you can ensure that it has the information you want and that it’s tailored for your company.
Con: It’s hard to build, collaborate on, and maintain a cap table in Excel
As your company grows and continues to fundraise, it’ll get harder and harder to ensure your cap table is accurate and that you have a single source of truth. People on your team might have different versions, and errors can creep in with every fundraiser or option grant. You also may find it hard to keep track of all the nuances manually.
How to get started
Open up a spreadsheet and start filling it out. Remember: the goal is to show who owns what.
It may help to have some cap table examples in front of you to model yours on (see below for an example). Or, we recommend avoiding this option altogether and just starting with a cap table template.
Option #2: Use a cap table template
If you’re just starting out, it might make sense to start by using a cap table template. With a template, you don’t have to create a cap table from scratch, and you don’t have to pay for software. However, we recommend switching to software when you begin fundraising or hiring employees. Software will better scale with your company as your ownership gets more complex.
Pro: It’s a quick way to start
A cap table template can give you a good starting point and save you some initial time up front. It’s an easy way to ensure you include all the basic fields. Having a simple cap table in a spreadsheet from the very beginning will make transitioning to software faster and easier.
Cons: It’s hard to keep updated and may not be robust enough for your needs
While cap table templates can work for early-stage companies, they don’t scale. If you’ve raised multiple rounds, are issuing options frequently, want to do scenario modeling (i.e. see what might happen in certain situations, like if you raise another round or sell the company), or want to track more than the basics, you’ll likely grow out of a spreadsheet cap table quickly.
Also, while a cap table template’s basic format might be correct, it’s still easy to make errors—especially when you’re issuing securities and having multiple people make updates. Spreadsheets can’t check your data real-time, and if multiple people have a copy and make updates without notifying the others, it’s almost impossible to keep each copy updated. With cap table software like Carta (who also serves as a private transfer agent), your cap table updates automatically when you issue securities via the platform—avoiding duplicate entries.
How to get started
Download the sample cap table template we’ve created. While it’s a good place to start, this cap table won’t scale with your company. We recommend using our template to learn what cap tables look like, then switching to cap table software and transfer agent services through Carta when your company starts to grow.
Download the cap table template
Option #3: Use cap table software from the beginning
While it may seem easy to track who owns what when you’re small, it’s essential to use cap table software as soon as you start raising money. Software can scale with you and stay updated automatically as you get new 409As, issue options, offer liquidity, and more.
While you may have to pay to use it, it could end up saving you time (and money) in the long run.
Pro: It’s the easiest way to keep your cap table updated
Since many transactions, like fundraising and issuing stock, affect and are often based on your cap table, it’s important to have one single source of truth. With cap table software, you no longer have to worry about sending the latest version to stakeholders whenever you change something. They can simply log in whenever they want.
If you use advanced cap table software through transfer agents, like Carta, transactions will automatically update your cap table. This saves you time when issuing electronic securities, getting 409A valuations, and keeping track of rules like the $100K limit and SEC Rule 144.
Cons: It costs money
While cap table software might seem like a nice-to-have, the time and money you save later, like during a fundraising, typically makes up for the cost.
Plus, with Carta, regular 409As are baked into all our plans. So if you’re planning on issuing stock options for the first time, just raised a financing round, or it’s been 12 months since your last valuation, you can get cap table management software and an audit-ready 409A for one low price.
How to get started
If you’re an early-stage founder ready to start on Carta now, we recommend our Starter plan, which includes a 409A valuation, too. Or, if you’re interested in Launch, our pre-seed plan available for free through our law firm partners (for companies with less than 25 stakeholders or $1M raised), reach out to our partnerships team or your lawyer.
Simplify cap table management with Carta
DISCLOSURE: This communication is on behalf of eShares Inc., d/b/a Carta Inc. (“Carta”). This communication is for informational purposes only, and contains general information only. Carta is not, by means of this communication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your business or interests. Before making any decision or taking any action that may affect your business or interests, you should consult a qualified professional advisor. This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Carta does not assume any liability for reliance on the information provided herein.