Capitalization Table (cap table) Basics

In my experience, I have found that even with founders and entrepreneurs have various levels of understanding of capital structure represented by what's called a capitalization table or "cap table."


Cap table is an Excel file that summarizes equity ownership structure in a corporation. The file lists entities, shares they own in the company, and the tranches or classes (e.g., Common, Series Seed, Series A, Series A-1, etc)

Fully diluted ownership represents the ownership of an entity based on all outstanding shares inclusive of issued and unissued options as well as warrants.

Each Preferred tranche has a price per share. Common shares are valued using the 409A valuation.

Post-money valuation: the most current round's price per share x fully diluted shares.

A detailed cap table will tell you amount of capital raised for each tranche, seniority of each tranche, and price per share.

By looking at the cap table, a few questions can be answered:

  • Who are the major investors in term so of ownership?
  • How much ownership does founder(s) and/or key employees have, and are those ownership levels ok?
  • Is the options pool sufficient for top up and top off?
  • Is the cap table "too big?"

Convertible notes are not included in the cap table but they should be taken into consideration when constructing a pro-forma cap table.

A note on convertible notes. I think convertible notes are useful when the size of the convertible note is small. Convertible notes, if too many (with various different terms) and/or too big (more than $5-7m in my view), creates an "overhang" on the cap table.

The cap table representing a fully-diluted view tells you the total capitalization and "size and nature of the pie." These are key factors that determine return.

Subscribe to Joyce J. Shen

Don’t miss out on the latest issues. Sign up now to get access to the library of members-only issues.