Cap Table
A spreadsheet or ledger showing who owns what percentage of a company — employees, founders, and investors — and how that ownership is structured.
A capitalization table (cap table) is a record of a company's equity ownership structure, showing every shareholder, what type of security they hold (common stock, preferred stock, options, warrants), how many shares or units they hold, and what percentage of the company they represent on both an 'as-converted' basis and a fully diluted basis. For private companies, the cap table is the definitive source of truth for who owns what — and understanding it is essential for evaluating the real value of equity compensation.
Cap tables change with every funding round, option grant, secondary sale, or conversion event. When new investors come in, they receive newly issued preferred shares, which dilutes existing shareholders' percentage ownership — though not their absolute number of shares. The option pool is also a key cap table element: most companies maintain a pool of unissued shares reserved for employee grants, and the size of this pool directly affects fully diluted share counts and therefore percentage ownership.
The most important thing employees need from the cap table is their percentage ownership — not their raw share count. '50,000 options' is meaningless without knowing how many total shares are outstanding. 0.1% of a company worth $1B is $1M; 0.1% of a company worth $20M is $20,000. When evaluating startup equity, always ask: 'What percentage of fully diluted shares does this grant represent?' A company that won't answer this question is a red flag.
Key Cap Table Terms
- Authorized shares: the total number of shares a company is legally permitted to issue. Usually far more than issued shares.
- Issued and outstanding: shares actually issued to shareholders. The denominator for ownership percentages on a 'basic' basis.
- Fully diluted: all issued shares plus all shares that could exist if all options, warrants, and convertible instruments were exercised. The most conservative (and accurate) ownership denominator.
- Option pool: unissued shares reserved for employee grants. Typically 10–20% of fully diluted shares at Series A.
- Pro-rata rights: investor right to participate in future rounds to maintain their ownership percentage.
What to Ask About the Cap Table
- 'What percentage of fully diluted shares does my grant represent?' This is the most important question.
- 'What is the current option pool size, and do you anticipate refreshing it before the next round?' A refresh dilutes existing holders.
- 'What is the total amount of preferred stock raised, and at what aggregate liquidation preference?'
- 'How many shares will likely be issued in the anticipated next funding round?'
- 'What percentage of the company do founders and management collectively own?' High founder ownership is generally positive.