Cap tables

What is a cap table?

A cap table (or capitalization table) is a document detailing a company’s equity ownership structure. It lists all the shareholders in a company, the number of shares they own, and the types of securities issued to each equity holder. A cap table also provides valuable insights into a company’s finances and is a necessary tool for managing equity, understanding ownership dilution, and planning for future fundraising rounds.

At its core, a cap table is used to tell founders, investors, and executives who owns how much of a company and to track changes in ownership over time. Maintaining an accurate cap table is especially important for startups and high-growth companies where ownership percentages can change dramatically following funding rounds, employee option pool creation, and secondary transactions. Cap tables also play a major role in due diligence for potential investors who are considering investing in your startup.

This video gives an overview to what a cap table is as part of Carta’s free Cap Table 101 curriculum.

The structure of a cap table

A cap table’s structure can vary depending on the size and stage of the company. As a company matures, its cap table evolves from a simple record of founders’ shares into a complex document detailing funding rounds, employee equity plans, and convertible instruments. Regardless of its structure, a cap table should be a clear, comprehensive, and accurate record of who owns what portion of the company and under what terms.

Key components

A cap table is organized into categories that detail ownership details, transaction history, and other financial information. Common components of a cap table include:

Ownership details

Ownership details are the foundation of a cap table. This section outlines who owns all types of equity in the company (including shares, options, warrants, and convertibles), the total ownership stake, and what percentage of the company that stake represents. 

• Shareholder information: Shareholder names, entities, and roles like founders, investors, employees, and advisors.

• Number of shares: Total shares owned by each shareholder.

• Ownership percentage: The percentage of the company owned.

Types of equity

This section outlines the different types of equity issued by the company, and the terms of each. 

• Common stock: Basic ownership shares typically issued to founders and early employees.

• Preferred stock: Issued to investors during funding rounds that include voting rights, liquidation preferences, and distribution priority.

• Stock options: Allows the holder the right to buy shares at a set strike price.

• Warrants: Similar to stock options, but usually granted to investors or lenders as incentives.

• Convertible instruments (convertible securities): Convertible notes or SAFEs (Simple Agreements for Future Equity), which are investments that convert into equity at a later date.

Share classes

Share class groups shares based on voting rights, liquidation rights, and other characteristics. Share class distinctions— common vs. preferred—help show shareholder privileges and the company’s equity structure. 

You may see labels like “Class A” or “Class B” for common stock. This is not a share class distinction between preferred vs. common (both classes are common stock). Preferred stock is usually divided into series (for example: Series Seed Preferred Stock, Series A Preferred Stock, Series B Preferred Stock, etc.).

Transaction history

The transaction history tracks all equity-related events in the company’s lifecycle, providing a detailed record of ownership and equity changes to the cap table. This includes:

• Funding rounds: Details of each fundraising event, including pre-money and post-money valuations, new shares issued, and total investment amounts from each investor.

• Stock or option grants: Shares allocated to employees, advisors, or other service providers.

• Exercises: Purchases of shares through options, warrants, or other instruments.

• Secondary transactions: Transfers or sales of existing shares to another holder.

Valuations

Valuation metrics show your shareholders how their equity translates into monetary value. These are some of the types of valuations you might include in your cap table:

• Pre-money valuation: The value of the company before a new funding round.

• Post-money valuation: The value of the company after the funding round.

• 409A valuation: This is an independent appraisal of a private company’s fair market value (FMV). The 409A value is used to set the strike price for employee stock options.

• Price-per-share: The value of each preferred share sold in the funding round (share price), which is calculated using the valuation divided by the total number of fully-diluted shares. It is important to note that the valuation of the latest preferred share class does not necessarily imply that common shares have the same FMV.

Dilution analysis

Dilution analysis helps show your existing shareholders how issuing new shares or securities impacts their ownership percentages. Most often, dilution analysis will include share dilution analysis under different scenarios, like new fundraising rounds or secondary sales. Note that secondary sales only impact new equity issuances and do not impact the dilution of your overall cap table.

Exit scenarios

Exit scenarios model outcomes for shareholders in liquidity events like acquisitions or initial public offerings (IPOs). This section of your cap table models payout distributions based on ownership, share classes, and liquidation preferences.

Common formats

Choosing the right format for a cap table depends on your company’s needs. Early-stage startups often use simple Excel spreadsheets or tables to track ownership, which are cost-effective and sufficient for straightforward ownership structures. 

However, as your company grows, raises new funding rounds, creates an employee stock option pool, and adds new share classes, a cap table software solution is usually needed to remain up-to-date, reduce errors, and enable scenario modeling. 

Even early-stage companies with simple ownership structures can benefit from creating their cap table on a dedicated software from the beginning.

Cap table example

While there’s no standard format, here’s an example of what a cap table could look like:

How to create a cap table

Creating a cap table involves compiling and organizing your existing equity ownership information into a structured format that is easy to understand and maintain. There are multiple ways to create and manage a cap table, but the best option for you depends on your company’s stage and ownership structure. 

The initial setup

The first step in creating your cap table is to collect all current equity and ownership information to create a complete and up-to-date picture of your company’s ownership structure. Any missing or inaccurate information can lead to complications down the line during fundraising or audits. 

Here’s what you’ll need to get started:

• Total authorized shares: The maximum amount of shares the company can issue

• Issued and outstanding equity (stock, shares, convertibles): The amount of shares currently allocated to stakeholders

• Shareholder details: Names, roles, and contributions of all equity holders

• Equity types: Details of issued securities including common and preferred stock, stock options, warrants, and convertible notes

• Funding rounds: Details of previous financing rounds, including valuations, total amount raised, and share price

• Option pool allocation: This includes the number of shares reserved for employee equity plans, issued and outstanding shares, exercised stock options, and more

Any relevant documentation including incorporation documents will streamline this process.

Add founders’ equity

Founders’ shares reflect the initial equity split between the company’s co-founders. Documenting the initial co-founder equity split establishes ownership percentages and helps track dilution over time. To add founders’ equity, record the number of common shares assigned to each founder based on agreed ownership split, and include a column for any applicable vesting schedules.

→ Data Desk: Learn more in Carta's Founder Ownership Report for 2025

Add investor equity

If your company has raised funds, the investor equity section will record the total investment amount, the total number of shares purchased by investors (or convertible notes or SAFEs), the price-per-share, the share class of the equity, and the voting rights and liquidation preferences agreed to with their equity. This section provides a clear record of fundraising, financial history, and company valuation.

Add an option pool

An option pool is a block of shares you set aside for equity compensation to employees and other service providers. By including an option pool in your cap table, you ensure you have shares available to incentivize employees, consultants and advisors and have more certainty about future dilution. For this step, you will need to size your option pool to be big enough to grant equity to new hires. You’ll also want to size your pool to allow for refresh grants for high performers. Other details include granted options and allocated shares.

Cap table management best practices

Whether your business is an early-stage startup or a mature organization, regular cap table management helps you avoid costly errors, remain in compliance with regulations, and build trust with your stakeholders. Below are a few best practices for cap table management to get ahead of these potential issues.

Maintain accurate records 

Errors and omissions can lead to delays in fundraising, regulatory penalties, and disputes between stakeholders.

• Regularly verify share ownership, equity types, and transaction history.

• Reconcile cap table data with term sheets, stock certificates, and board resolutions.

• Include all equity and convertible debt instruments in your cap table.

Use an organized format

An organized cap table is easier to share with stakeholders, potential investors, and lawyers and prevents misunderstandings. 

• Use consistent layouts and labels on columns and rows.

• Differentiate between share classes and associated rights or preferences.

Update your cap table regularly

A cap table is a dynamic, living document that changes frequently. Failing to update it regularly will lead to issues during due diligence and fundraising.

• Record new issuances, grants, and transfers immediately after they occur.

• Show changes in ownership percentage and share dilution after a funding round.

• Review and update quarterly. 

Plan for dilution

Failing to account for dilution can cause issues with stakeholders.

• Model dilution scenarios when preparing to issue new shares during fundraising.

• Communicate the impact of dilution to stakeholders.

• Size your option pool appropriately to avoid frequent dilutive increases in the future. 

Use cap table management software

Cap table software reduces errors and grows with your business.

• View, track, and issue equity directly to stakeholders.

• Scale with streamlined workflows for fundraising, issuing securities, and managing equity.

• Stay compliant and audit-ready with 409A valuations and GAAP/IFRS reports on-demand.

Simplify cap table management with Carta

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Ensure compliance

Equity transactions are subject to taxes and regulations, and failure to maintain compliance can lead to penalties. 

• Use a cap table software with built-in compliance support.

• Maintain documentation of board approvals and 409A valuations.

• Understand the regulatory landscape and comply with reporting requirements.

Tools for cap table management

Carta began over a decade ago with the simple solution of fixing cap tables and taking them off manual spreadsheets. If your cap table still lives in a spreadsheet, you have to be diligent about using consistent names, updating your version whenever something happens, and sending the updated version to relevant stakeholders, like your lawyer. 

The easiest way to keep your cap table updated is to use our cap table software. We automatically update your cap table whenever you issue a security issuance or when someone accepts their security. Learn more about our features, take a video tour, or request a demo today.

Cap table template

In the very early stages of a startup, cap tables often live in a spreadsheet since ownership is usually relatively simple and easy to track early on. But if you’re creating a cap table for the first time, starting from scratch can get complicated quickly. Download Carta’s free cap table template for a good starting point—just know it’s not a good long-term solution, as Excel-based spreadsheets won’t scale with you as you grow.

Cap table software

Once you begin hiring employees and raising new rounds of financing, a cap table management software is the way to go. Instead of you having to remember to update your cap table and send the latest version to stakeholders or new investors, it’ll automatically stay updated as you get new 409A valuations, issue employee stock options, offer liquidity, and more. Platforms like Carta can also help you stay compliant with regulations like Internal Revenue Code Section 409A, Rule 701, Rule 144, and the $100K ISO limit.

What's wrong with Excel?

Traditionally, the legal ownership of a private company “lived” on paper shares issued to founders, investors, and employees. Some of the biggest venture-backed private companies still have their lawyers issue paper securities and model their cap tables in Excel. However, this method is antiquated and inefficient because there is no single source of truth. 

There’s usually more than one version of a manually updated Excel cap table model. Your attorney manages one copy (for an hourly fee) and you or your CFO manage another version. If an employee joins and is issued options—or later on if an employee exercises stock options—and you forget to send the updated cap table to the lawyer or vice versa, suddenly there isn’t a single source of truth. Mistakes compound and things get complicated.

It can take your law firm many billable hours to issue stock option grants taking into consideration all IRS and SEC equity rules. These can add up quickly when it’s time for your next funding round from potential investors. We’ve seen quotes of over $20,000 in legal fees to reconcile different versions of a company’s cap table.