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Share Cap Table Planning

Planning for your Funding Round Part 1 – your Share Cap Table

If you are a startup or an early stage growth business looking for early stage equity funding, then one of the things to prepare is a share capitalisation table – or more commonly known as a share cap table.

As the name suggests it is a simple table setting out the company valuation and the number of shares.   At its core it is a simple, but organised document, showing the total ownership and share capitalisation of a business.

Every company might like to have one, but for most private companies it doesn’t change much.  If you are looking for funding then it is one of the essential information tools to show yourself and your potential investors.  It is very useful way to quickly and easily show the share history and your company valuations.

Overall, a capitalization table shows the total market value of a company and its components.  This is also especially important for unquoted companies because they set their own valuations – whereas quoted companies get this information from the market.  It forms a key point of reference for business managers – and should be considered in every financial decision that has an impact on market capitalization and the company’s market value. As with all financial tools it is important for the share cap table to be accurate, to reflect the business’s needs, and to be regularly maintained for decision making based on the most current information.

As your company raises money and adds shareholders, or has sweat equity or grants options to employees, you will need to update the table and so it also becomes a table that shows each investor’s stake in the business.

One really important point – and reason the founders need a share cap table – is that you can easily track the dilution of your shares.   One of the important (and sad but true) points of raising equity funds for your business is that you give away a proportion of the ownership for other people’s money.   The key is not to give away too much!  The share cap table helps you to keep track of this.

If you are considering a funding round and want some help with your share cap table then get in touch.

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