So you want to bring your awesome idea or company to the market?
You will likely have a to-do list longer than you can keep up with. But one item that should be at the very top of your to-do list is nailing your capitalization table! This handy tool will help you make better business decisions, win investors and create strategic growth strategies. It is something that every startup uses and ends up being the ultimate reference guide throughout your company’s journey.
But if you are wondering what is a cap table, we are here to help guide you towards becoming a pro at using one and giving you some useful tips that will further support your business venture.
We’ve rounded up five facts about cap tables that you should know from the get-go!
1. There are pre-built cap tables for you to use
You don’t have to start from a blank sheet. In fact, there are some amazing startup support programs that you can access online that have pre-populated cap tables for people like you. There will be different modeling equations for you to select based on your individual needs and it is already easily structured for you to build out. It’s the ultimate way for anyone to become a cap table pro!
2. It doubles as a time capsule and fortune teller
Cap tables are basically a handy balance sheet to highlight your company’s position at a current place in time. So it will act as a time capsule for you referencing where your company was at back in time, while also acting as a fortune teller in predicting future financial outcomes and risks based on certain decisions. This is something that many investors will be keen to see as well when deciding if they are going to give you financial backing to grow!
3. There are always the basic elements
No matter what type of company you have, there will always be the core basic elements you should be familiar with. This includes your equity stake, stocks, ownership details, legalities, sales, debt, and equity. Having these details in your cap table will allow you to always see the over-arching capital structure in the most accurate and up-to-date way.
4. Highlight the key players
In addition to helping you understand your company’s financial situations, a cap table will also help you see the executive powers of your company. It will show how much certain employees own in your company, which is often a key part of their benefits package. It will also help you see who has the most power in decision-making and how much liability you have to each partner.
5. Knowledge is power
Not every person has access to your company’s cap table. Sometimes, you may want to omit the details of your cap table to investors and just give them a broader overview. For example, you may not need to share your employee’s stakes in the company with investors. Or you can make it so that people have to request access to certain parts of the cap table so you can make an up-to-date decision on what information would be important to share. Knowledge is power as much as financial backing is, so be strategic with who gets access to your cap table and how it is set up to be shared.
Cap tables are here to help you take your company to the next level and keep all your information organized. From using pre-designed cap tables from experts to knowing the basic fundamentals up front, these five things to know about cap tables will ensure you truly can be successful!