Cap Table

What Is a Cap Table?

A capitalization table, commonly called a cap table, is a comprehensive record of a company's equity ownership structure. It details every security the company has issued — common stock, preferred stock, stock options, warrants, convertible notes, SAFEs, and any other equity instruments — along with who holds them, how many they hold, and the terms under which they were issued. The cap table is the definitive document for understanding who owns what percentage of a company and how that ownership changes over time.

What a Cap Table Contains

Key Elements

A typical cap table includes:

• Founders' shares — Common stock held by the company's founders.
• Investor shares — Preferred stock held by venture capital firms, angel investors, and other financial investors, organized by funding round (Series Seed, Series A, Series B, etc.).
• Employee equity — Stock options, restricted stock awards, and RSUs granted to employees, including details on exercise prices, vesting status, and option types (ISO vs. NSO).
• Other instruments — Warrants, convertible notes, SAFEs, and any other rights to acquire equity.
• Fully diluted share count — The total number of shares assuming all options, warrants, and convertible instruments are exercised or converted.

How It Is Organized

Cap tables are typically organized to show both the current ownership (shares actually issued and outstanding) and the fully diluted ownership (including all shares that could be issued upon exercise of options, conversion of notes, etc.). The fully diluted view is more useful for understanding true economic ownership because it accounts for all potential future share issuances.

Reading a Cap Table

Ownership Percentages

The most important column for employees is usually the fully diluted ownership percentage. This tells you what share of the company you would own if everyone exercised their options and all convertible instruments converted. Your stock option grant represents a percentage of this fully diluted total.

Liquidation Preferences

While not always visible on a simple cap table, the terms attached to preferred stock — particularly liquidation preferences — significantly affect how proceeds are distributed in an exit. A company's cap table tells you what percentage each shareholder owns, but the preference stack tells you who gets paid first and how much.

The Option Pool

The cap table will show the total option pool — the shares reserved for employee equity grants — and how much of that pool has been allocated versus how much remains available. A larger unallocated pool suggests the company plans to hire more people and grant more equity, which could lead to additional dilution.

Practical Implications for Startup Employees

Why You Should Ask to See It

As an employee with stock options, you have a legitimate interest in understanding the cap table. Key questions it can answer:

• What is my ownership percentage? Divide your option shares by the fully diluted share count.
• How diluted will I be? Look at the unallocated option pool and anticipated future funding rounds.
• What are the liquidation preferences? These determine whether common shareholders (you) receive anything in various exit scenarios.

Cap Table Modeling for Exit Scenarios

A cap table allows you to model what your shares would be worth at different exit valuations. Because of liquidation preferences, the relationship between company valuation and your payout is not linear. In a modest exit, investors with preferences may receive most or all of the proceeds, leaving little for common shareholders. In a large exit, preferences become less significant and ownership percentages matter more.

Red Flags

Watch for cap table issues that could reduce your equity's value:

• Heavy liquidation preferences — Multiple rounds of participating preferred stock can consume a large share of exit proceeds before common shareholders see anything.
• Large unallocated option pool — Suggests significant future dilution.
• Excessive convertible debt — Notes that convert into equity at the next round will dilute existing shareholders.

How It Relates to Exercising Stock Options

The cap table is your map for understanding the potential value of your stock options. Before making exercise decisions, review the cap table to understand your fully diluted ownership, the preference stack, and the range of outcomes at different exit valuations. This analysis helps you determine whether the cost of exercising — including the exercise price and taxes — is justified by the potential return across realistic scenarios.