What is the Cap Table and why does it matter?

Full Explanation

The cap table is a spreadsheet that tracks every class of equity and convertible security: founders' shares, employee options (vested and unvested), SAFEs, convertible notes, preferred stock from investors, and warrants. For each, it records the holder, the number of shares or option equivalent, the vesting schedule, and the resulting ownership percentage on a fully diluted basis. A clean, accurate cap table is essential for several reasons: investors require it during due diligence; it drives decision-making during financing (how much dilution will founders and employees incur?); it determines exit proceeds (if a company sells for £10M, knowing everyone's stake determines who receives what); and it surfaces legal problems early (duplicate grants, missing vesting documents, option grants beyond authorised pool). The fully diluted cap table is the version that matters — it assumes all options and convertibles are exercised, showing the true ownership picture. Many early-stage companies maintain poor cap tables until they raise institutional capital, at which point cap table cleanup becomes a condition of funding. Maintaining accuracy from day one saves enormous pain later.

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