Capitalization Table (Cap Table)
A document or spreadsheet showing the equity ownership of a company, including founders, employees, investors, option holders, and SAFE/note holders. Modern cap tables typically show: outstanding common shares, outstanding preferred (by series), outstanding options, available option pool, outstanding warrants, outstanding SAFEs and notes (with conversion analysis), fully-diluted ownership percentages. Foundational document for any equity transaction, fundraising, or M&A.
A Capitalization Table (Cap Table) is a document showing the equity ownership of a company, including founders, employees, investors, option holders, and SAFE/note holders. Modern cap tables are typically maintained as spreadsheets or in specialized cap table software (Carta, Pulley, AngelList Cap Table). Cap tables are foundational to any equity transaction: fundraising, employee option grants, M&A, and investor reporting all require accurate cap table information. The cap table evolves continuously as shares are issued, options are granted and exercised, and SAFEs/notes convert.
Standard cap table structure
Comprehensive cap table includes: (1) common stock, founders, employees (after option exercise), early investors; (2) preferred stock by series, Series Seed, A, B, etc., showing each round's investors and shares; (3) options, outstanding (granted but not exercised), available pool (granted to plan but not yet to specific employees), exercise prices, vesting status; (4) warrants, typically issued to lenders, advisors, or strategic partners; (5) SAFEs, outstanding SAFEs with valuation caps and discounts; (6) convertible notes, outstanding notes with principal, interest, conversion terms; (7) fully-diluted analysis, what percentage each holder owns assuming all options exercised, SAFEs converted, notes converted.
Key cap table calculations
Critical cap table analyses: (1) fully diluted ownership, assumes all options exercised, all convertibles converted; standard for valuation and ownership analysis; (2) issued and outstanding, actual shares currently outstanding; relevant for voting; (3) basic, outstanding common only; less commonly used; (4) pre-money / post-money, ownership before vs. after a financing; (5) scenario analysis, ownership under various conversion scenarios for SAFEs and notes; (6) liquidation waterfall, proceeds distribution under various exit scenarios considering preferred preferences. Sophisticated cap tables support multiple scenario analyses.
The fully-diluted denominator
"Fully diluted" includes all securities convertible to common stock: (1) outstanding common; (2) outstanding preferred (on as-converted basis); (3) options granted (regardless of vesting); (4) options reserved but not granted (option pool); (5) outstanding warrants; (6) SAFE/note conversions (at lower of cap or financing price). The fully-diluted denominator is the foundation for ownership percentage calculations. Different parties define "fully diluted" differently, some include only outstanding options, others include reserved pool. Definition matters for valuation negotiations.
SAFE and convertible note conversion modeling
SAFEs and convertible notes complicate cap table analysis: (1) SAFE conversion, at next qualified financing; the conversion price is generally the lower of the cap price and the financing price, reduced by any discount the SAFE provides; (2) convertible note conversion, same as SAFE plus accrued interest; (3) scenario modeling, at various financing prices, what percentage do SAFE/note holders receive? (4) cap table impact, SAFEs and notes can substantially dilute existing stockholders at conversion. Sophisticated cap table software supports SAFE/note scenario modeling automatically.
The option pool refresh
At each financing round, option pool is typically "refreshed" to maintain target pool size (typically 10-20% of fully-diluted post-money). The refresh creates additional dilution: (1) pre-money pool refresh, dilutes existing stockholders only; investor-favorable; (2) post-money pool refresh, dilutes both existing stockholders and new investor; founder-favorable. Option pool sizing and timing is heavily negotiated and substantially affects founder dilution.
Cap table software
Modern cap table management typically uses specialized software: (1) dedicated cap table platforms, offered by several vendors with differing features and pricing; (2) spreadsheet, simple companies; manual maintenance. Cap table software may provide scenario modeling, option grants, SAFE/note tracking, and investor reporting. Some providers also offer transfer agent services.
Cap table maintenance discipline
Cap table accuracy requires ongoing discipline: (1) document all share issuances, board resolutions, stock certificates, transfer ledger; (2) document all option grants, board approval, grant agreements, vesting schedules; (3) track SAFE/note issuance; (4) update for option exercises; (5) update for transfers, secondary sales, gifts, divorce, death; (6) periodic reconciliation, quarterly or as-needed; (7) diligence preparation, clean cap table is foundational to any transaction. Cap table errors discovered during M&A diligence can delay or kill deals.
For Texas startups, cap table discipline is foundational. A cap table is only as reliable as the board approvals, grant agreements, and share records behind it, and investors typically test it against those documents in diligence. Defects found late can sometimes be cured through the ratification procedure in Tex. Bus. Orgs. Code §§ 21.901 et seq. Common pitfall: cap table errors accumulating over time, small errors at Series A become substantial issues at Series B and beyond. Diligence cleanup is expensive and time-consuming.