Essentially a “cap table” is a list of a company’s securities (in the form of stocks, warrants, options, etc.) and the holders of such securities. At the most basic level, a cap table shows who has an ownership interest in, or rights to an ownership interest in, the company. Many cap tables provide further detail as to the nature of such interests (e.g. whether the stock at issue is common, preferred, detailed by class or series, etc., or whether the stock belongs to an “investor,” “employee” or “founder,” etc.). Cap tables range in size from one shareholder to many thousands of shareholders. If the company has a more complex capital structure, having a good cap table can help an entity make decisions faster and more accurately. Here are the basic elements of a good cap table:
Accessibility: Because your company may have to provide a cap table to myriad different entities or investors, it should be in a format that is easily accessible (e.g. Microsoft Excel). Not everyone uses Microsoft Excel but many businesses do and probably more so than most other options.
Centralized: All security interests should be in one document (if possible). How inconvenient would it be if you were in a hurry and needed to search one document for Series A preferred interests and another . . .