What Is a Cap Table? A Founder’s Guide to Reading and Maintaining One

A cap table, short for capitalization table, is the record of who owns your company. It lists every shareholder, how many shares they hold, what kind of shares those are, and what percentage of the company each person or fund owns. It also tracks the equity that is promised but not yet issued, such as stock options and SAFEs.

If you are raising money, your cap table is one of the first documents an investor asks for. It is also one of the first places they find problems. This guide covers what a cap table contains, how to read one, and how to keep it accurate as your company grows.

What goes in a cap table

At minimum, a startup cap table records:

• Shareholders: founders, employees, advisors, angels and funds.
• Security type: common stock, each series of preferred stock (Seed, Series A), options, warrants, SAFEs and convertible notes.
• Shares held: the number of shares each holder owns, by class.
• Ownership percentage: usually shown two ways, outstanding and fully diluted.
• Option pool: shares reserved for employees, split into granted and still available.
• Convertible instruments: SAFEs and notes that will turn into shares at a future priced round.
• Vesting: for founders and employees, how much of their equity has vested and on what schedule.

A simple example

Here is a cap table for a company after a small seed round.

Holder	Security	Shares	% outstanding	% fully diluted
Founder A	Common	4,500,000	50.0%	45.0%
Founder B	Common	3,500,000	38.9%	35.0%
Seed investors	Series Seed Preferred	1,000,000	11.1%	10.0%
Options granted	Options	300,000	n/a	3.0%
Pool available	Reserved	700,000	n/a	7.0%
Total fully diluted (9,000,000 outstanding)		10,000,000	100%	100%

How to read it: outstanding vs fully diluted

Outstanding shares are shares that have actually been issued: here, the founders' 8,000,000 common shares plus the 1,000,000 preferred shares, for 9,000,000 total.

Fully diluted shares add everything that could become stock: granted options, the unallocated option pool, warrants, and in many calculations SAFEs and notes as they would convert. Here that total is 10,000,000.

Investors almost always price rounds on a fully diluted basis. That is why Founder A owns 50% of the outstanding shares but 45% fully diluted. When an investor says they want 20% of the company, they nearly always mean 20% fully diluted after the round, including any increase to the option pool. Read the term sheet closely on this point.

What changes your cap table

Your cap table should change every time one of these happens:

1. A stock issuance to a founder, employee or investor
2. A stock option grant, exercise, or cancellation
3. A SAFE or convertible note being signed, and later converting
4. A priced financing round
5. A repurchase of unvested shares when someone leaves
6. A transfer of shares between holders
7. An increase to the option pool

Each of these events should have a matching approval and a signed document. That link between the cap table and the paperwork is where most problems start.

The cap table is a summary. The documents are the truth.

A spreadsheet or cap table tool is a summary of what you believe happened. The legal record is the set of signed documents behind it: stock purchase agreements, board consents approving each issuance, option grant agreements, SAFEs, and 83(b) elections.

During diligence, investors' counsel does a cap table tie-out: they match every line of your cap table to the document that created it. We cover that process in what happens after the term sheet. If a line has no signed agreement, no board approval, or numbers that do not match, it becomes a diligence finding.

Common cap table mistakes

These are the issues that come up most often when a cap table is checked against the records:

• Shares issued without board approval. The stock was issued, but no board consent authorized it.
• Unsigned or missing stock purchase agreements. The cap table shows the shares, but there is no signed agreement.
• Options promised in offer letters but never granted. An employee was told they would get options, and the board never approved the grant.
• Missing 83(b) elections. Founders with vesting stock who did not file within 30 days. See the 83(b) election that almost went missing.
• SAFEs left off the cap table. Founders forget that SAFEs will dilute them at the next round.
• Option pool math that does not add up. Grants that exceed the reserved pool, or a pool increase that was never approved.
• Departed founders or employees still listed with full equity. Unvested shares that should have been repurchased.

More on these in startup due diligence red flags.

How to keep your cap table accurate

1. Keep one source of truth. One cap table, one owner, no competing spreadsheets.
2. Update it at the moment of each event, not at the end of the quarter.
3. Link every line to its documents. For each issuance, keep the signed agreement and the board approval together.
4. Reconcile regularly. Once a quarter, and always before you start fundraising, check the cap table against the signed records.
5. Model before you sign. Before a SAFE or a round, model how it changes everyone’s fully diluted ownership.

Spreadsheet or cap table software?

A spreadsheet works for the first few months, when you have two founders and nothing else. Once you have options, SAFEs or more than a handful of holders, dedicated software such as Carta or Pulley reduces math errors and keeps a history. Neither one, however, checks whether your documents actually support what the cap table says. That is a separate step, and the one investors care about in diligence. We explain how the two fit together in DocChief and Carta: your ledger and the evidence behind it.

Check your cap table against your documents

DocChief reads your signed corporate documents and checks your cap table against them. The Cap Table Health Check flags issuances without approvals, missing signatures and other gaps, each one cited to the source page, so you can fix them before an investor finds them. See how it works.