What it is: A capitalization table, or cap table, is a record that outlines the ownership structure of a company, listing ownership percentages and types of securities held by investors, founders, employees, and stakeholders.
Why it is important: Cap tables provide a clear picture of equity ownership, allowing startups to manage and track ownership changes, dilution, and potential exit scenarios. They are crucial for fundraising, mergers and acquisitions, and corporate governance.
How to use it in startups: Startups use cap tables to allocate equity, issue stock options or equity grants to employees, and evaluate ownership implications during fundraising or acquisition negotiations. Maintaining an accurate and up-to-date cap table helps ensure transparency and informed decision-making.