Building your ‘cap table’

by Kamal Hassan

One thing experienced investors and entrepreneurs take for granted is the company’s ‘cap table’, short for the company’s capitalization table. People often say ‘send me your cap table’: to new entrepreneurs, this question can be intimidating and stressful. It doesn’t need to be. [It can also be hard. With IncMind, it doesn’t need to be.]

What is a ‘cap table’?   It is a record of the ownership of your company: it shows who owns how much of the company. A detailed cap table would also show what type of shares (more strictly speaking ‘securities’ – see footnote) people bought, when they bought them, and how much they paid for them. It’s a very important document. If your company is ever bought, or dividends are ever paid, i.e., if your company is ever actually worth something, the cap table will determine who gets what share of the money. Investors want to see the cap table so they can figure out how much they will get from their investment, and to see what you have promised to other people.

Cap tables are historically built on Excel. This is a matter for concern, when you consider that 88% of all spreadsheets have errors in them (according to research by Ray Panko reported in 2013). I used to build our company’s cap table myself on Excel, and was embarrassed on how often I found errors in it. And I’m a former Bain consultant, i.e., spreadsheet jockey! That’s why we built a cap table tool in IncMind: a tool with built-in templates that does everything the standard spreadsheets used to … only it is already set up for you, and it comes without the errors.


Corporate lawyers especially have an interesting relationship with cap tables. They are normally the guardians of the company’s official minute book, which includes the official ownership record. They are supposed to verify every transaction. Strictly speaking they should verify that papers are signed and payment is received before issuing shares. But of course the company’s CEO controls the information, and the CEO will often just say ‘oh yeah, Sally Brown just bought 1,000 shares, oh, and we gave 500 options to Wu Zheng six months ago’. Most lawyers just issue the shares as and when directed by the CEO, without verification. This is silly. That’s why we built fields into our automated tool. With every transaction you can load the appropriate documentation: evidence of signature, evidence of payment, and a copy of the share certificate.


These are the sorts of little housekeeping matters which are easy to ignore until later … and if you do ignore them, when later comes, you may find out that you don’t own what you thought you did in the company. The options you were promised, but never actually got issued? It’s pretty hard to issue them after the acquisition offer comes in.

It doesn’t matter whether you use IncMind to build your cap table or not. You need to record the following:

  • each transaction in your ‘securities’ (see footnote) or shares
  • who received, how many shares, on what date, for how much money
  • for each transaction, attach the contract, proof of payment and share (or other) certificate


At the end you will want to add up all transactions, and you can then generate a shareholder register. This shows, for each kind of security/share, who owns how many of each kind of share … and normally for convenience it shows the percentage owned of the class of shares, and the percentage owned of the total company. Do this by building an Excel table, by using IncMind, or by any other solution you prefer: the choice is yours. Just make sure you do it … and do it soon. If your cap table is in bad shape, you may not own what you think you own, and you – or people you have made promises to – may end up not getting what you (they) deserve.

Note: there are many types of documents that can give you ownership of a company. Because not all of these are shares, there is a more general term, called ‘securities’. Common types of securities include:

  • common shares: if you only have one kind of shares, by default these are common shares: you get what is left in the company after everyone else takes what they are owed
  • preferred shares: shares which have special rights compared to common shares
  • options: typically options to acquire common shares: a contract that gives you the right to buy, e.g., common shares, at an agreed price under certain conditions up to an agreed time in the future; these are typically granted to employees by the company to give them the benefits of ownership in a firm, without the tax bill that would come with a gift of shares
  • warrants: a type of option
  • convertible debt: debt which can be converted into shares at an agreed price under certain conditions up to an agreed time in the future: this is often granted to investors to give them the benefits of ownership in a firm, with the protections granted to debtholders if the company does poorly

You will notice that one thing all securities shown on the cap table have in common is the fact that they are either shares, or they can be exchanged for shares.

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