Table of Contents
What is a cap table?
The cap table, or capitalization table, is a record of a startup’s ownership structure, including the distribution of equity among shareholders. It’s an essential tool for startups as it provides a clear picture of the ownership of the company. The rights and privileges associated with each class of shares, and the potential dilution that may occur with future funding rounds or stock option grants. The cap table helps founders and investors understand the company’s current and potential future value. It is critical for making informed decisions about fundraising, equity distribution, and exit strategies. Without a cap table, startups may struggle to track equity ownership, make informed decisions, or accurately value their company. This can hinder their ability to attract funding and grow their business.
What Should The Cap Table Look Like After Each Round?
The ownership percentage of the active founder team in a startup can vary depending on various factors such as the stage of the company, the amount of funding raised, the valuation of the company, and the terms of the investment. However, here is a general guideline for the ownership percentage of the founder team post pre-seed, seed, series A, series B, and series C. Having a cap table that is very different from the general guidelines will likely result in fundraising problems.
Pre-Seed ownership
At this stage, the founder team usually owns a significant percentage of the company, typically between 85-100%. However, this percentage can vary depending on the size of the founding team and the amount of investment needed.
Seed ownership
At the seed stage, the founder team’s ownership percentage typically ranges from 60-80%. This percentage can vary based on the amount of funding raised, the valuation of the company, and the terms of the investment.
Series A ownership
At the Series A stage, the founder team’s ownership percentage usually ranges from 40-50%. This decrease in ownership is due to the dilution that occurs when new investors come in and buy equity in the company.
Series B ownership
At the Series B stage, the founder team’s ownership percentage typically ranges from 10-30%. The decrease in ownership percentage is due to further dilution caused by the entry of new investors.
Series C ownership
At the Series C stage, the founder team’s ownership percentage typically ranges from 5-20%. The ownership percentage can vary based on the amount of funding raised, the valuation of the company, and the terms of the investment.
It’s important to note that these ownership percentages are general guidelines and can vary based on a variety of factors. Additionally, it’s essential for the founder team to strike a balance between retaining ownership and bringing in new investors to help grow the company.