Complete cap table management guide 2025: build equity tracking spreadsheet, founder dilution mechanics (100%→41% through Series B + ESOP), shareholder tracking, dilution calculations, scenario modeling, and software comparison (Carta $280/mo, Ledgy €3k/yr, Pulley ₹1200/yr, free options for <25 stakeholders).
Table of Contents
What Is a Cap Table? (Why It Matters)
A capitalization table (cap table) is a spreadsheet showing who owns what percentage of your company. It’s your equity ownership record. If you’re raising funding, going through an acquisition, or tracking employee equity, you need a cap table.
Why You Need a Cap Table (The Stakes)
- Clarity: Who owns what? This is the foundation of company ownership records
- Fundraising: VCs demand cap tables before investing. It shows shareholder structure, dilution, and complexity
- Employee equity: Tracking ESOP grants, vesting, exercises. Critical for equity accounting and tax filings
- Exit planning: Acquisition or IPO. Cap table determines payout waterfall (who gets paid in what order)
- Legal compliance: Board meetings, shareholder records, 409A valuations all depend on accurate cap tables
- Due diligence: Buyers/investors will scrutinize cap table for hidden liabilities (pending claims, disputed options)
Key Terms You Need to Know
- Common stock: Founder shares. No preference in liquidation. Usually founder + early employees
- Preferred stock: Investor shares (Series A, B, C). Priority in liquidation. VCs get these
- Options: Right to buy shares at strike price. Employees get these. Vesting over 4 years typically
- Warrants: Right to buy shares. Usually given to lenders or partners as bonus. Rare for employees
- Fully diluted cap table: Assumes all options exercised + all convertibles converted. Shows “worst case” dilution
- Post-money valuation: Company value AFTER investment round. Pre-money + investment = post-money
Building Your Cap Table: Step-by-Step
Start simple. Use a spreadsheet or free tool. Get the structure right first, software later.
Essential Cap Table Columns
- Shareholder name: Founder, investor, employee
- Share type: Common, Series A Preferred, Series B Preferred, Options, Warrants
- Number of shares: Raw count (e.g., 500,000 shares)
- Strike price (if options): Exercise price per share
- Vesting schedule: 4-year/1-year cliff (standard), or grant/exercise/sale dates
- Purchase price per share: What they paid (for investors)
- Total investment: Number of shares × purchase price
- Percentage ownership: Shares ÷ total fully diluted shares = %
Simple Founder Cap Table (Before Fundraising)
| Shareholder | Share Type | # Shares | % Ownership | Notes |
|---|---|---|---|---|
| Founder A | Common | 450,000 | 45% | Equal split |
| Founder B | Common | 450,000 | 45% | Equal split |
| ESOP Pool | Options | 100,000 | 10% | For employees |
| Total | — | 1,000,000 | 100% | Always adds to 100% |
Cap Table After Seed Round (Simple Example)
- Pre-money valuation: ₹50Cr
- Seed investment: ₹10Cr for 20% of company
- Post-money valuation: ₹60Cr
- Price per share post-seed: ₹600 (₹60Cr ÷ 1M shares)
- Seed investor gets: ₹10Cr ÷ ₹600 = 166,667 new Series A Preferred shares
| Shareholder | Share Type | # Shares | % Ownership (Post-Seed) |
|---|---|---|---|
| Founder A | Common | 450,000 | 36% |
| Founder B | Common | 450,000 | 36% |
| ESOP Pool | Options | 100,000 | 8% |
| Seed Investor | Series A Pref | 166,667 | 20% |
| Total | — | 1,166,667 | 100% |
Key Observation: Dilution Already Happened
- Founder A before seed: 45%. After seed: 36%. Dilution = 9 percentage points (20% investor ÷ 80% pre-investors = everyone diluted 20%)
- ESOP before seed: 10%. After seed: 8%. Also diluted 20%
- New investor: 20% (no dilution, they’re new)
Shareholder Tracking & Components
A complete cap table tracks 6 types of equity holders. Here’s what to track for each.
The 6 Equity Holder Types (What to Track)
| Holder Type | What to Track | Tax Implications |
|---|---|---|
| Founders (Common) | Shares, vesting (83(b) election), dilution through rounds | 83(b) election required if restricted shares. LTCG on sale after 24 months |
| Early employees (Common) | Grant date, shares, vesting schedule, 83(b) status | Same as founders. Income recognition on vesting if 83(b) filed |
| Investors (Preferred) | Round (Series A/B/C), price per share, total investment, liquidation preference | Preferred shares have different tax treatment. Tracked separately from common |
| Employees (Options) | Grant date, strike price, # options, vesting schedule, exercise status | Perquisite income tax at exercise. LTCG on sale if held >24 months |
| Convertible holders (SAFEs/Notes) | Investment date, amount, conversion terms, conversion date, pro-rata rights | No immediate tax. Tax happens on conversion to shares |
| Warrant holders | Grant date, exercise price, # warrants, expiration date, exercise status | Rare for employees. More common for advisors/lenders. LTCG on sale |
Critical Data Points (Don’t Forget These)
- Vesting dates: When options vest. Critical for employee equity planning
- 83(b) election status: For restricted founder stock. If not filed within 30 days, huge tax consequences
- Strike prices: Exercise prices for all options. Must match FMV at grant for tax
- Liquidation preferences: For preferred shares. Changes payout waterfall in exit
- Anti-dilution clauses: Some preferred holders have special protections
- Board seats: Who has board representation. Often linked to shareholding %
Dilution Mechanics: The Math of Founder Ownership Loss
This is the single most important section. Understanding dilution prevents surprises at exit.
The Dilution Formula
New Ownership % = Old Ownership % × (1 – Dilution %)
Real-World Dilution Walkthrough (Founder from 100% to 41%)
Stage 1: Founder Starts Alone (100%)
- Founder shares: 1,000,000 common shares = 100%
Stage 2: First Hires (Founder Now 90%)
- Grant to 3 early engineers: 100,000 common shares total (10% of company)
- Total shares now: 1,100,000
- Founder ownership: 1,000,000 ÷ 1,100,000 = 91% (slight reduction from 100%)
Stage 3: Create ESOP Pool (Founder Now 81%)
- Allocate to ESOP: 125,000 shares (12.5% of company pre-ESOP)
- Total shares now: 1,225,000
- Everyone gets diluted 12.5%: Founder 91% × (1 – 12.5%) = 81%, Early engineers 9% × 87.5% = 7.9%
Stage 4: Series A Fundraising (Founder Now 56.7%)
- Series A terms: ₹10Cr investment for 20% of company (post-money dilution)
- Shares for investor: Calculate backwards from 20% = 306,250 new Series A shares
- Total shares now: 1,531,250
- Everyone diluted 20%: Founder 81% × (1 – 20%) = 64.8%, Employees 7.9% × 80% = 6.32%, ESOP 11.25% × 80% = 9%
- Series A investor: 20% (new money, no dilution)
Stage 5: Series B Fundraising (Founder Now ~41%)
- Series B terms: ₹20Cr investment for 25% of company (post-money dilution)
- Total shares now: 2,041,667
- Everyone diluted 25%: Founder 64.8% × (1 – 25%) = 48.6%, Series A 20% × 75% = 15%, ESOP 9% × 75% = 6.75%
- Series B investor: 25% (new money, no dilution)
The Final Cap Table (Post-Series B + ESOP refresh)
| Shareholder | # Shares | % Ownership | Journey |
|---|---|---|---|
| Founder | ~996,333 | 48.6% | 100% → 91% → 81% → 64.8% → 48.6% |
| Early employees | ~85,500 | 4.2% | 10% → 9% → 7.9% → 6.3% → 4.7% |
| ESOP (total) | ~137,813 | 6.8% | 0% → 12.5% → 11.25% → 9% → 6.75% |
| Series A investor | ~306,250 | 15% | 0% → 20% (Series A) → 15% (Series B dilution) |
| Series B investor | ~512,500 | 25% | 0% → 25% (Series B) |
| Total | ~2,038,396 | 100% | — |
Key Takeaway on Dilution
- Founder loss is automatic: Every new investor dilutes existing shareholders pro-rata
- ESOP dilutes everyone: Creating employee pool dilutes founders, early employees, and existing investors equally
- Dilution accelerates with funding: Seed round 5-10% dilution, Series A 15-25%, Series B 20-30%
- BUT: While ownership % decreases, company value increases. 40% of ₹1000Cr company = ₹400Cr (vs 100% of ₹10Cr startup = ₹10Cr). Math works out better
Scenario Modeling: “What If” Questions
Build scenario models to answer key questions before they happen.
Common “What If” Scenarios
Scenario 1: What if we raise Series A at different valuations?
- Pre-money ₹25Cr vs ₹50Cr: Higher valuation = less dilution. Founder ownership post-Series A could be 65% vs 72%
- Build model: Try 3-5 different pre-money values. Show % ownership for all stakeholders
- Decision value: Know what valuations preserve founder control
Scenario 2: What if employees exercise all options?
- Fully diluted cap table: All options exercised = new shares issued
- Example: 500K options outstanding at 25% vested = 125K currently exercisable. 375K still vesting
- If all 500K exercised: Total shares increase, founder % dilutes further
- Build model: Compare pre-dilution vs fully diluted cap table
Scenario 3: What if we acquire another company?
- Stock-for-stock deal: Issue new shares to acquired company’s founders
- If we give 5% for acquisition: Everyone diluted 5%
- Build model: Show cap table before and after M&A deal
Scenario 4: What happens at exit? (Payout waterfall)
- Acquisition at ₹500Cr: Build waterfall showing: preferred holders paid first (with liquidation preferences), then common holders, then employees
- Example: Series B investors have 1x liquidation preference. Gets ₹20Cr paid first. Remaining ₹480Cr split pro-rata among all shareholders
- Build model: See exactly who gets what at different exit prices
Cap Table Software: Build vs Buy
At some point, spreadsheets break down. Here’s when to switch and what tools exist.
When to Upgrade from Spreadsheet
- Before Series A: VCs want professional cap table + 409A valuation. Hard to do in Excel
- More than 10 shareholders: Spreadsheet management gets messy. Formula errors creep in
- Complex equity (multiple share classes, convertibles): Spreadsheet can’t handle automatically
- Regular updates needed: Monthly employee grants, vesting schedules. Manual is error-prone
Cap Table Software Comparison 2025 (India/Global)
| Software | Pricing | Best For | Standout Feature |
|---|---|---|---|
| Ledgy | Free tier (up to 25 stakeholders), €3k/yr for Launch plan, €36/stakeholder/yr | Global startups, European-friendly | Automated vesting, round modeling, investor dashboards |
| Pulley | $1200/yr minimum (25 stakeholders), transparent pricing | Startups wanting simplicity + transparency | Clean interface, employee dashboard, equity offer letters |
| Carta | $280/mo minimum (~$3360/yr), no public pricing | Series A+ startups, comprehensive needs | 409A valuations, ASC-718 compliance, 83(b) filings |
| LTSE Equity | Free tier available, up to $250/mo | Companies with long-term vision, IPO track | 409A valuations, strong compliance, public company ready |
| Spreadsheet (Google Sheets/Excel) | Free | Seed stage (<3 shareholders), simple structures | Complete control, no vendor lock-in, flexible |
Build vs Buy Decision Matrix
- KEEP SPREADSHEET IF: <10 shareholders, pre-seed stage, simple common stock only, changing rapidly
- BUY SOFTWARE IF: Series A+ funding, multiple share classes, employee grants ongoing, VCs require 409A valuations
- HYBRID APPROACH: Use spreadsheet for cap table backbone. Use software for 409A valuations + employee dashboard
Free Cap Table Tools (Under ₹10K/Year)
- Ledgy free tier: Up to 25 stakeholders, basic cap table, vesting tracking
- Google Sheets template (Carta): Download free template, customize in your own sheet
- EquityList starter: ₹11/stakeholder/year = <₹300/year for small team
Best Practices & Common Mistakes
Cap Table Best Practices
- Update monthly, not yearly: Every equity event (hire, grant, exercise, investment) should be logged immediately. Annual is too late
- Always calculate fully diluted: Show both current cap table and fully diluted (if all options exercised + convertibles converted). VCs ask for both
- Document everything: Keep copies of all share certificates, option agreements, 83(b) elections, investment docs in same folder
- Use version control: If spreadsheet, use Google Sheets (tracks history) not local Excel. Name files with dates: “Cap Table 2025-12-29”
- Annual audit: Once per year, cross-check cap table vs legal documents + board resolutions. Discrepancies compound
- Communicate to team: Annual all-hands share high-level cap table. Build understanding of equity structure. Removes mystique
Common Cap Table Mistakes (Avoid These)
- Forgotten early employees: Friend takes ₹5K cash payment for idea help, verbal promise of 0.5%. Never documented. Years later: “You owe me equity!” Avoid with written grant letters
- No 83(b) elections: Founder gets restricted stock but doesn’t file 83(b) in 30 days. Major tax consequences. ALWAYS file within 30 days
- Math errors in dilution: Calculated Series B but didn’t apply dilution to existing shareholders correctly. Cap table doesn’t add to 100%. Catches issues only at board meeting
- Lost documents: 5 years of equity events but no paper trail. Investor asks “show me the 83(b) letter” → can’t find it. Causes legal problems
- Strike price errors: Set option strike price at wrong FMV. Creates huge tax liability or IRS scrutiny. Always use 409A valuation
- Liquidation preference confusion: Didn’t track 1x vs 2x preferences. At exit, calculation breaks down. Investors don’t get what they expected
Red Flags in Cap Table (Things to Fix Immediately)
- Doesn’t add to 100%: Formula error or missing shareholders. Fix before showing anyone
- Large unexplained changes in ownership %: Round dilution should follow math. If founder suddenly 60%→40% without fundraising, something’s wrong
- No full diluted version: VCs ask for this. If you can’t produce it, you don’t understand your own equity
- Founder ownership <10% post-Series B: Potential over-fundraising. Founders may not have enough skin in game to stay motivated
- ESOP pool >15%: Diluting existing shareholders too much. Consider tightening pool
Key Takeaways: Cap Table Mastery
1. Cap table is ownership record: who owns what %. Every investment round, ESOP grant, option exercise changes the table. Always adds to 100%.
2. Dilution is automatic: new investor takes % → existing shareholders diluted pro-rata. Founder 100%→41% is realistic path through seed + Series A + Series B. Math, not unfairness.
3. Founder dilution example: 100% (solo) → 90% (10% first hires) → 81% (ESOP pool) → 65% (Series A 20%) → 49% (Series B 25%). About 51% dilution total.
4. Fully diluted cap table shows worst case: all options exercised + all convertibles converted. Shows maximum potential dilution. VCs require this view.
5. Build cap table with columns: shareholder name, share type (common/preferred/options), # shares, strike price, vesting schedule, % ownership. Always maintain current version.
6. Track 6 equity holder types: founders, early employees, investors (preferred), employees (options), convertible holders (SAFEs/notes), warrant holders. Each has different tax treatment.
7. Software threshold: use spreadsheet pre-Series A (<10 stakeholders). Buy software at Series A (Carta $280/mo, Ledgy €3k/yr, Pulley $1200/yr). VCs want professional infrastructure.
8. Free tier options: Ledgy free (up to 25), LTSE Equity free, EquityList €11/stakeholder/yr. Don’t overpay early.
9. Dilution formula: New ownership % = Old ownership % × (1 – Dilution %). Founder 80% with 20% Series A = 80% × 80% = 64%.
10. Scenario modeling: build 3-5 cap table versions showing different funding valuations + exit prices. Know impact before decisions.
11. Update monthly, not yearly. Every hire, grant, exercise logged immediately. Annual audits catch errors. Real-time accuracy prevents disputes.
12. File 83(b) elections within 30 days for restricted founder stock. Missing deadline = massive tax consequences. Non-negotiable.
13. Document everything: share certificates, option agreements, investment docs, 83(b) letters, board resolutions. Keep in single folder for due diligence. You’ll need these.
14. Red flags: cap table doesn’t add to 100%, founder ownership <10% post-Series B, ESOP pool >15%, unexplained ownership changes. Fix immediately.
15. Action: Build cap table spreadsheet today with current state (founders, employees, investors). Add 3 scenario models (seed, Series A, Series B valuations). Share with advisors for feedback.
