A unicorn company is a startup that is valued at $1 billion or more. This is because a startup having that high of a valuation is an incredibly rare achievement.
If you want to join the ranks of these unicorn companies you are going to need to stay organized and efficient. One of the most important parts of this will be creating and maintaining your cap table.
With so much riding on the cap table, it can be overwhelming to think about how to keep it updated and accurate. The unfortunate truth is that being overwhelmed can lead to mistakes, and that is the last thing you need.
In this post, you will learn all about cap table basics, how to build a cap table and how to manage a cap table. You will also learn why our Airrange software can make your life so much easier and allow you to focus on other important areas of your business.
Keep reading to learn more!
Content in this post
- What is a Cap Table?
- What information do Cap Tables include?
- Use at different stages: Pre-Seed, Seed, Series A and on
- Free software for Cap Table Management: Excel and Airrange
- Organize Your Business Data from the start
What Is a Cap Table?
A cap table, which is also called a capitalization table, is a spreadsheet that breaks down the different shareholders' equity stakes in the company.
They are used to make financial decisions that will impact the company's market capitalization or valuation. They document important data from the company and need to be well-maintained and accurate.
You may be wondering who you're keeping this table so updated for. Is the cap table for investors, management, the government? And who has access? Can any shareholder request a cap table?
For private companies in the U.S., there is no regulation that says you must disclose your cap table. This means that those making decisions should have access, but who else can see it is up to you.
Shareholders have to be able to know how much equity they hold, its current nominal value, and where they stand in terms of preference for distributions. Outside of this information, they are not required to have access to the cap table.
What Information Do Cap Tables Include?
The first section of the cap table should include information about the company, specifically, information about the founders, plans for how much stock will be issued, and the market capitalization of the company.
In another section, there should be a column listing all the shareholders of the company. Next to their names should be the amount of and type of stake they each have. This should include not only common stock, but preferred shares, warrants, and convertible equity as well.
There is a lot of information to include here, but it can be made easier by using software(a cap table template for excel) that helps to keep things organized and all together.
Use at Different Stages
These are typically used in startups and other early-stage businesses but can be used by companies at any stage. As each round of funding progresses they will get moreand more detailed.
The cap table at the pre-seed money level will mainly reflect the founders and their ownership. It will need to list the founders, the number of shares they each have, those shares' nominal value, and what that translates to in terms of ownership percentage.
It also must include information on the amount of stock that the company plans to issue. Breaking it up into shares outstanding, shares that haven't been issued yet, and shares set aside for employee stock options.
Early investments in the seed round are often made by angel investors. You will need to work with them to establish a pre-money valuation and the amount of their investment for this round. You will also need to determine the price per share.
Once you document these new investors in the cap table, you will need to calculate a post-money valuation by adding the investor's seed money to the pre-money valuation.
Series A and On
Series A funding typically comes in the form of a venture capital firm.
At this point, you will need to update your cap table management software to include your company's employee stock option program (ESOP). This is because many venture capitalists require an ESOP so they know that the top employees have an incentive to stay, making their investment less risky.
You also have to keep track of and document any potential ownership dilution that will affect the existing shareholders at each new round of funding.
Free Software for Cap Table Management
Managing your cap table and all the necessary data can be difficult, but it can be made easier by using the right software. The ideal software would be user-friendly, secure, and able to easily integrate with other software programs.
Excel Cap Table
Excel is great when you're looking for software that is free but has many different functions. It is flexible and enables you to build and manage a great cap table. It is also easy to share due to its widespread use. That makes it perfect for startups. And actually most investors, too, use Excel for their Cap Tables.
However, while it is easy to share, there is not a good option if you need to control who can see what data. You will find yourself needing to create several different files in order to only send the information that a particular person should have access to.
There is also the fact that anyone can make any change to the files, without there necessarily being a record of it. And with only one set of data, it is difficult to run scenarios and test different business decisions before you make them.
Additionally, it is hard to integrate with other apps and software to increase usability.
Where Excel fails, Airrange picks up the slack. Airrange works with Excel as an added layer on top of it and is able to integrate with other apps as well. Your cap table file and its data remain in your Microsoft OneDrive or SharePoint at all times. So the sensible company data don't need to be uploaded to another cloud.
Airrange makes it possible for you to pick and choose what you want to share and with whom. This eliminates the need to send out different versions of the file depending on who can have access to what data. You can even decide what permissions each person that sees the spreadsheet has, down to their ability to make edits or leave comments.
All of this allows you to keep things much more organized, error-free, and easy to follow. Additionally, it adds change tracking to a spreadsheet so you can look at the historical cell values without having to dig up older backup versions.
This software also lets you build apps without needing to code, enabling you to build a calculator, database, or other apps easily. You can save time on presentations too, as Airrange allows you to present, even when Excel on its own does not. App building is also part of Airrange's freemium package.
Organize Your Business Data from the Start
Having a well-organized and user-friendly cap table is critical for your company, but it doesn't have to be such a headache.
This blog just gives you a quick intro to the options you have with Excel and with Airrange as a sharing and app building layer on top. At Airrange, we appreciate the flexibility and ownership of our data that Excel provides. However, we also wanted a modern interface and easier sharing option including a transparent access management. And all this without compromising Excel functionality and Microsoft data security. Airrange is free to try and offers a freemium option as well. Go ahead and find out if Airrange is for you. If you have any questions let us know.
You can start using the Airrange Excel platform for your cap table management today. Sign up and find your free Excel template including an app ready for using and sharing in your company or go to Airrange.io to learn more.