cap table
Short for capitalization table — a spreadsheet or document showing the equity ownership of a company, including all shareholders, their percentages, and types of equity held.
Example
“After the Series B, the cap table showed founders owning 40%, investors 50%, and employee options pool 10%.”
Memory Tip
CAP table = the CAPITALIZATION table. Who owns what percentage of the company.
Why It Matters
Understanding cap tables matters because if you are considering investing in a startup or accepting equity compensation, you need to know what percentage of the company you actually own and how it compares to other shareholders. This directly affects how much of any future profits or sale proceeds you would receive, making it crucial for evaluating job offers or investment opportunities.
Common Misconception
Many people assume that owning 10 percent of a company means you will receive 10 percent of profits immediately, but cap tables show that equity ownership only has value if the company becomes profitable or is sold. Additionally, different types of equity like common stock and preferred stock have different rights and priorities in a payout, so ownership percentage alone does not tell the full story.
In Practice
Imagine a startup has three founders where Sarah owns 40 percent, Mike owns 35 percent, and Lisa owns 25 percent based on their initial cap table. When they raise $2 million in funding, investors receive 20 percent equity, which dilutes each founder to 32 percent, 28 percent, and 20 percent respectively while Lisa retains her original 25 percent stake value but at a lower ownership percentage.
Etymology
Shortened from CAPITALIZATION TABLE — a table showing the CAPITALIZATION (ownership structure) of a company.
Common Misspellings
Small business accounting made simple
Related Terms
More in accounting
Other accounting terms you should know
See Also
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