Capitalization Table

A capitalization table (cap table) is a detailed record of a startup’s ownership structure, listing all shareholders, their percentage of ownership, and the types of securities they hold. It is a crucial tool for founders, investors, and employees to understand equity distribution and dilution over time.

Key Components of a Cap Table:

  1. Founders’ Equity – The initial ownership stakes of the startup’s founders.
  2. Investor Shares – Details of venture capital firms, angel investors, and other stakeholders who have invested in the company.
  3. Employee Stock Options – Shares allocated to employees through stock option plans.
  4. Convertible Securities – Instruments like SAFE notes or convertible debt that may convert into equity in future funding rounds.
  5. Preferred vs. Common Shares – Differentiation between investor-preferred stock and common stock held by founders and employees.
  6. Dilution Tracking – How ownership percentages change with each funding round.

Why Cap Tables Matter:

  • Investor Decision-Making – Helps investors assess their stake and potential returns.
  • Fundraising Strategy – Guides startups in structuring future funding rounds.
  • Exit Planning – Determines how proceeds are distributed in an acquisition or IPO.

Cap tables can start simple but become complex as a startup grows. Many companies use specialized software or spreadsheets to manage them effectively.

Written by Swedish Ventures, Rolf Olsson. Remarks to this article could be sent to glossary@swedishventures.se

ASO: DD-01-02