Here’s why cap tables can tell your startup stories.
Cap tables or capitalization tables have become an important asset for your startup business.
You don’t believe us? Well, what if we say that your company’s cap tables actually tells your entire startup’s story, with a few twists and turns here and there!
That caught your attention, right? The good news is that in this article, we’ll help you realize why you should go for a capitalization table and how it affects the entire journey of your startup company.
What Exactly Is a Cap Table?
You cannot listen to a story without knowing who the storyteller is and how they know about this particular story.
In the case of your startup company, the storyteller is your company’s capitalization table.
A capitalization table or a cap table is a spreadsheet that contains the name of all the investors, founders, executives, and key employees that have a share in the company.
Still, how does a cap table say anything about your company?
The answer is because a cap table contains almost all the information about the company’s owners, investors, stakeholders, and how much percentage of the company they own.
How Can a Cap Table Tell Your Startup Story?
Now that you’re aware of the meaning of a cap table, let’s see how a cap table can tell the entire story of your startup.
Cap Table Talks About the Owners and Founders of the Startup
The first and foremost thing about any story is the introduction of the main characters.
Similarly, a capitalization table talks about the founders of the startup company.
This information mainly revolves around your financial role in the company, along with how much percentage of the company’s share you own, along with your partner or co-founder (if there are any of them).
Cap Table Talks About the Investors of the Startup Company
Apart from the founder and co-founder, the capitalization table of your company also talks about the investors who have invested in your company.
The cap tables consist of almost all the information related to the investors such as their names, type of securities, when they invested, and how much percentage they own in a company.
Thus, a cap table can provide the information of investors and so, shows the equity ownership capitalization of the company.
Cap Table Shows the Equity Share of Employees of the Company
As a startup, you may have had difficulties in finding employees. However, as your startup expanded, you may have offered the company’s share to key employees as equity.
So, a cap table consists of names of the employees who have a share of the company, along with the percentage of it.
Thus, a cap table also ensures that the names of the equity shareholders, including the employees, are listed down, along with the corresponding information.
Cap Table Grows As Your Company Expands
Just as the story advances, a cap table does too, when your startup expands.
This is because as you get new investors and employees as shareholders, your cap table will get longer and more complicated.
Thus, recording each and every step of your company as it advances ahead.
In this way, a startup can tell your entire startup story to an outsider.
How Can a Cap Table Sell Your Startup’s Story?
Selling a story can definitely bring you revenue. Now, here’s how a cap table can assist you in doing that.
Firstly, any new potential investor may want to know about other investors in the company. So, with the help of a well-maintained cap table, you can get some investors to invest in your company.
Moreover, even while making big finance-related decisions, a cap table can come to use as you can assess the previous investments and take note of it.
If revenue isn’t your concern but compliance is, well, tax authorities may also rely upon cap tables to check whether everyone has paid tax correctly or not. This can help in preventing extra tax charges and penalties.
In conclusion, a cap table can help in reaching your company to newer heights by presenting the story in the world.
The only catch here is that you need to let the story unfold by preparing and maintaining your company’s cap table.