Why Startups should focus on their Cap Table

If you run a startup, you have a lot on your plate. You are focused on the quality of your products and services, hiring new employees, and managing your equity stake. One of your most important tools is your cap table, which will give you a detailed breakdown of your financing. Your cap table tells your financial story. It has information on equity ownership, the value of those shares, and possibly dilution. Even though you have a lot to do every day, you must make sure your cap table is up to date.

The first reason that you need to focus on your cap table is that you need to figure out what financing you need to make the company grow as quickly as you want it to. You must make sure your financing strategy is dialed in with the capital demand of the company. A well-developed cap table makes it easier for you to understand your exact financial position. You can quickly reference the cap table to understand how much capital you have available, where your current capital is being used, and what you have left over.

You also need your cap table to help you keep track of equity. At first, it will be easy to remember who has what percentage stake in the company. But, as your company grows, keeping track of equity can become more challenging. If you want to have a reliable cap table, it’s important to understand exactly who has how much equity, and what will happen if you bring on more investors.

Your cap table also helps you save time. Your time is your most valuable resource, and you need to use your cap table to quickly figure out where your resources are being spent, how much you have left, and how quickly your company is growing. If you have to dig into your financial records to answer questions, you will waste valuable time. Many of your financial questions should be answered by quickly looking at the table.

Tracking your cap table correctly also has legal implications. In the United States, your cap table can be used as a formal legal corporate record and is required to be maintained and tracked in a certain way with data requirements set forth by the SEC. It is an official display of equity ownership. If there are questions about who owns what percentage of the company, the first thing anyone will do is ask for the cap table. You will use your cap table to reflect stock ownership changes, so you must keep your table up to date. It is one of the most important documents for start-up companies. Start-up companies can rely on a cap table management provider, like Equity Track to do this.

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