Cap Table Meaning
The cap table (or capitalization table) is a table, spreadsheet or chart that illustrates a company’s equity capitalization. It provides a detailed breakdown of a business’ shareholders’ equity. A cap table is most often used for startups and other early-stage companies but can be applied to enterprises of all sizes. It shows the total market value of the business and its constituent components.
The cap table will often include all equity ownership capital such as common shares, preferred shares, convertible equity and warrants. It lists each type of equity ownership capital, the individual investors as well as the share prices.
The order of investor listing may be done in different ways. One way would be to list founders first followed by executives and key employees that have an equity stake. These are then followed by venture capital, angel investors and other parties involved in the development of the business plan. Alternatively, investors can be listed in descending order by shareholding with the largest investors at the top.
The cap table provides an important basis for key financial decisions around equity ownership, market value and market capitalization. Capitalization allows private companies to calculate market value and have a basis for new capital issuance marketing and shareholder reporting. It also promotes tax/regulation compliance as well as audit accuracy.
A cap table must be accurate, customized and regularly maintained to ensure all decision making is founded on the most relevant information. Startups usually have a small number of investors comprising founders and perhaps family, friends and angel investors. For example, each funding round will change the cap table.