Cap Table Management: Your Equity Spreadsheet (Template)

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)

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

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)

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)

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)

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