A cap table (capitalization table) is the foundation of your startup's equity structure. This guide shows you how to build and manage one—without paying thousands for software like Carta.
What Is a Cap Table?
A cap table is a spreadsheet or database showing who owns what percentage of your company. It tracks:
- Founders - Original equity holders
- Investors - Preferred shareholders from funding rounds
- Employees - Stock option grants and exercises
- Advisors - Typically small equity grants for guidance
- Option Pool - Reserved shares for future hires
When You Need a Cap Table
Day 1: Even a 2-person startup needs a cap table. Document founder splits before writing code.
First Hire: When you grant equity to anyone, formal tracking becomes essential.
First Funding: Investors require detailed cap tables during due diligence.
Beyond Seed: Software like Carta becomes worthwhile at Series A+ complexity.
Basic Cap Table Structure
Every cap table needs these columns:
| Column | Description | |--------|-------------| | Name | Shareholder name | | Share Class | Common, Preferred, Options | | Shares | Number of shares owned | | Ownership % | Shares / Total Outstanding | | Price per Share | For options: strike price | | Notes | Vesting status, grant dates |
Step-by-Step: Building Your Cap Table
Step 1: Determine Total Authorized Shares
Most startups authorize 10,000,000 shares at incorporation. This is a legal maximum, not shares actually issued.
Why 10M?
- Clean math for percentage calculations
- Room for options, future rounds
- Standard VC expectation
Step 2: Issue Founder Shares
Founders receive common stock. A typical 2-founder split:
| Founder | Shares | Ownership | |---------|--------|-----------| | Founder A | 4,000,000 | 50% | | Founder B | 4,000,000 | 50% | | Total Issued | 8,000,000 | 100% |
Note: Only 8M of 10M authorized shares are issued. The remaining 2M can be issued later.
Step 3: Create the Option Pool
Before raising, create an option pool for future hires. Typically 10-20% of the company.
Important: Create the pool BEFORE fundraising. VCs expect the pool to come from founders' shares, not from diluting their investment.
| Shareholder | Shares | Ownership | |-------------|--------|-----------| | Founder A | 4,000,000 | 45% | | Founder B | 4,000,000 | 45% | | Option Pool | 888,889 | 10% | | Total | 8,888,889 | 100% |
Step 4: Model Your First Fundraise
When you raise money, investors get new shares. The formula:
Investor Shares = Investment / Price per Share
Price per Share = Pre-Money Valuation / Pre-Money Shares
Example: $500K at $5M Pre-Money
Price per share = $5,000,000 / 8,888,889 = $0.5625
Investor shares = $500,000 / $0.5625 = 888,889 shares
Post-money cap table:
| Shareholder | Shares | Ownership | |-------------|--------|-----------| | Founder A | 4,000,000 | 40.9% | | Founder B | 4,000,000 | 40.9% | | Option Pool | 888,889 | 9.1% | | Seed Investor | 888,889 | 9.1% | | Total | 9,777,778 | 100% |
Step 5: Track Option Grants
When you hire employees with equity:
| Employee | Shares | Vesting | Cliff Date | Vested | Unvested | |----------|--------|---------|------------|--------|----------| | Employee 1 | 50,000 | 4yr/1yr cliff | Jan 2026 | 0 | 50,000 | | Employee 2 | 30,000 | 4yr/1yr cliff | Mar 2026 | 0 | 30,000 | | Granted | 80,000 | | | | | | Pool Remaining | 808,889 | | | | |
Fully Diluted vs Outstanding
Outstanding Shares: Actually issued shares (founders + investors + exercised options)
Fully Diluted Shares: Outstanding + all unexercised options + option pool
Always use fully diluted for ownership calculations. It's what matters at an exit.
Common Cap Table Mistakes
1. Not Documenting Early
"We'll figure out the split later" leads to disputes. Document founder equity on day 1 with signed agreements.
2. Wrong Option Pool Timing
Creating the pool after a priced round dilutes existing shareholders AND new investors. Create it before.
3. Forgetting About Vesting
Founders should vest too. Standard: 4-year vesting, 1-year cliff, maybe credit for time already worked.
4. Ignoring the 409A
After any significant financing event, get a 409A valuation. Issuing options below fair market value creates tax problems.
5. Spreadsheet Errors
As complexity grows, spreadsheets break. Review formulas regularly, and move to proper software by Series A.
When to Use Proper Cap Table Software
Spreadsheets work when:
- 2-4 shareholders
- No funding or seed only
- Simple option grants
- You understand the math
Use Carta/Pulley/Angellist when:
- 10+ shareholders
- Multiple funding rounds
- Complex option grants
- Need 409A valuations
- Preparing for Series A+
Free vs Paid Cap Table Solutions
| Solution | Cost | Best For | |----------|------|----------| | Google Sheets | Free | Pre-seed, simple structure | | PureBuild Equity Calculator | Free | Modeling scenarios | | Pulley | Free tier | Early startups | | Carta | $$$$ | Series A+ | | AngelList Stack | $$ | YC companies |
Cap Table Modeling: Exit Scenarios
Use our Dilution Simulator to model:
- Future funding rounds
- Different exit valuations
- Liquidation preference impact
- Employee option outcomes
Example: Modeling a $50M Exit
Starting point:
- Founders: 70% combined
- Investors: 20% (with 1x liquidation preference)
- Employees: 10%
At $50M exit:
Without preferences:
- Founders: $35M
- Investors: $10M
- Employees: $5M
With 1x non-participating preference:
Investors invested $4M for 20%. They choose between:
- $4M (1x return)
- $10M (20% of $50M)
They take the 20%, so outcome same as above.
If exit was $15M:
Investors choose between:
- $4M (1x return)
- $3M (20% of $15M)
They take the $4M preference, leaving $11M for common:
- Founders: $11M × (70%/80%) = $9.6M
- Employees: $11M × (10%/80%) = $1.4M
Cap Table Best Practices
1. Keep It Simple
Start with clean numbers. 10M authorized, round founder splits. Complexity comes naturally—don't add it early.
2. Version Control
Save dated copies. "CapTable_v3_2025-02-01" lets you track changes over time.
3. Separate Outstanding vs Granted vs Available
Track three numbers for the option pool:
- Available: Shares remaining to grant
- Granted: Shares promised but not vested/exercised
- Exercised: Shares actually owned by employees
4. Know Your Fully Diluted Count
Always know the fully diluted share count. It's the denominator for all ownership calculations.
5. Update Regularly
Update after every:
- Funding event
- Option grant
- Option exercise
- Departure (forfeiture)
Using Our Free Calculator
Our Equity Calculator helps you:
- Calculate ownership - Enter shares and get instant percentage
- Model dilution - See how future rounds affect your stake
- Estimate exit value - Project outcomes at different valuations
No signup required. Your data stays in your browser.
Conclusion
A cap table isn't complicated—it's just math. The key principles:
- Start clean - 10M authorized, clear founder splits
- Document everything - From day 1
- Use fully diluted - For all calculations
- Model scenarios - Before fundraising
- Upgrade when needed - Software at Series A+
Start with our free tools, and upgrade to Carta when your cap table complexity justifies the cost.
Ready to model your cap table? Try our free Equity Calculator and Dilution Simulator.