Cap Table Basics: How to Read and Keep One
A cap table, short for capitalization table, lists who owns what in your company: shares, options and anything that can turn into shares, such as SAFEs. Investors read it before anything else in diligence. A clean one makes every later decision easier.
What is a cap table?
A cap table is a record of every security the company has issued or promised: common shares held by founders, preferred shares held by investors, stock options granted to employees, the unissued option pool, and convertible instruments such as SAFEs and convertible notes. It shows each holder’s count and percentage.
| Holder | Security | Shares | Fully diluted |
|---|---|---|---|
| Founder A | Common | 4,500,000 | 45.0% |
| Founder B | Common | 4,500,000 | 45.0% |
| Granted options | Options | 300,000 | 3.0% |
| Unissued pool | Reserved | 700,000 | 7.0% |
| Total | 10,000,000 | 100% |
What does fully diluted mean?
Fully diluted counts every share that exists or could exist: issued shares, all granted options, the unissued pool and, in many views, convertibles at their expected conversion. Investors use fully diluted ownership because it shows what each holder will own if everything converts. SAFEs need their own calculation; see how SAFEs convert.
What belongs on the cap table?
- Common shares issued to founders and early team.
- Preferred shares issued in priced rounds, with their rights.
- Options and the pool: granted, vested, exercised and reserved. See employee equity grants.
- Convertibles: SAFEs, convertible notes and warrants, with caps and discounts.
- Vesting for founders and employees.
- Supporting records: board approvals, share certificates or registers, signed agreements.
Canadian corporations must keep a securities register and, for federal companies, a register of individuals with significant control, under the Canada Business Corporations Act or the provincial equivalent.
What are common cap table mistakes?
| Mistake | Why it matters |
|---|---|
| Verbal equity promises | Disputes later; investors find them in diligence |
| Founders without vesting | A departed founder keeps a large stake |
| Unrecorded SAFEs or notes | Surprise dilution at the priced round |
| Options granted without board approval | Grants may be invalid; tax problems |
| Spreadsheet versions out of sync | No one knows the true numbers |
Fix these before you raise; investors will ask. The data room is covered in the data room checklist.
If it isn’t signed, it isn’t on the cap table.
Promises made in chats or emails become disputes. Every share and option needs paperwork and board approval.
How do you keep a clean cap table?
- Keep one source of truth: cap table software or a single controlled spreadsheet.
- Update it after every issuance, grant, exercise or transfer.
- Match it to board minutes and signed agreements.
- Model each new round before you sign.
- Have your lawyer review it before diligence.
Starting with co-founders? Read how to split equity with a co-founder.
Frequently asked questions
What is a cap table?
A record of who owns the company’s shares, options and convertible securities, with counts and percentages.
What does fully diluted mean?
Ownership counted as if all options, the unissued pool and convertibles were turned into shares.
Are SAFEs on the cap table?
Yes, as convertible securities, usually shown separately until they convert in a priced round.
Should the option pool be on the cap table?
Yes. Both granted options and the unissued pool count in the fully diluted view.
Do I need cap table software?
Not on day one, but one controlled source of truth is essential, and software helps once you have investors and employees.
What do investors check on a cap table?
Founder ownership and vesting, the pool, convertibles and that every entry matches signed documents.
Sources & further reading
Standard documents and tax rules change. These sources let you check the current terms directly.