Cap Table is an important document that records the ownership structure of a startup. It plays an essential role in tracking the number of shares outstanding, the value of the company and the interests of shareholders. This article will guide startups how to create and update capitalization tables effectively.

What is capitalization table?

Capitalization table, or Cap Table, is an important management tool in the field of finance and business management. It is a summary of information about the types of capital and shares of a business, including issued shares, stock options, unissued shares, and other types of debt. Specifically, Cap Table often includes the following information:

• Types of shares issued and number of shares of each type.
• Types of stock options and number of options for each type.
• Investment funds and other types of capital (if any).
• Information about shareholders and the shares they own.
• Market value of each type of share and total capitalization value of the enterprise.

Cap Table provides a comprehensive view of the capital structure and ownership of the business, helping managers and shareholders clearly understand their ownership percentage as well as the value of the business. At the same time, it is also a useful tool in managing financial decisions, share transactions, and business valuation.

For example

Startup ABC has 100 million common shares outstanding. Venture capitalists hold 80% of the shares, founders hold 15% of the shares, and the remaining 5% belongs to the staff. The value of each share is 10,000 VND. Therefore, the total capitalization value of ABC company is 1,000 billion VND.

How is the capitalization table used?

Capitalization Table (Cap Table) is used to manage and track the capital and ownership structure of a business. Here are some ways that capitalization tables are used:

Shareholder management

The capitalization table provides detailed information about the number of shares each shareholder owns and their percentage ownership in the business. This helps management track and update shareholder information, as well as help identify main shareholders and their ownership percentage.

See more: Simple formula for calculating the capital contribution percentage

Managing stock options

If a business grants stock options to employees, the capitalization table records information about the number of options granted and their value. This helps management track options granted and make decisions about granting additional stock options in the future.

Capital management and business valuation

The capitalization table provides information about the capitalization value of a business based on the value of shares and other types of capital. This helps managers evaluate businesses and make decisions about raising capital, trading shares, or valuing the company in business deals.

Support in deals and transactions

The capitalization table provides detailed information about the capital structure of a business, helping investors, banks, or cooperating parties better understand the ownership ratio and value of the business. This helps create trust and support in business-related deals and transactions.

How to create and update capitalization tables

To create and update a cap Table for a business, you can follow these steps:

Collect basic information

Gather information about all shareholders and the shares they own, including founders, investors, employees, and anyone else involved in the business’s shares. Identify the different types of shares, including preferred shares, ordinary shares, and stock options.

Use special software or tools

Use special software or tools to create capitalization tables. There are many software and online tools available to help you create and manage capitalization tables easily and accurately.

These software and tools often provide built-in templates and automatic calculation features. This helps you create a capitalization table quickly and accurately.

Update information periodically

Update information on the capitalization table periodically, including updating the number of shares, information about new transactions (such as issuing new shares, trading shares, or granting options to buy shares), and changes in the capital structure of the enterprise.

Information on the capitalization table should be updated after each new capital raising round, after each equity transaction, and when there are any changes in shareholders or shares of the business.

Check and confirm information

Check and confirm information on the capitalization table to ensure accuracy and completeness. Make sure that all information about shareholders, shares, and transactions is updated and thoroughly checked before using the capitalization table for any purpose.

By following the steps above and using the right tools, you can create and update capitalization tables easily and accurately. Thereby helping to manage and monitor the capital structure of the enterprise effectively. And don’t forget to regularly update information about the capitalization table here.