A cap table is not a summary of ownership. It is the record of every instrument issued, and the errors in it are discovered by somebody else’s lawyer during diligence.
A capitalisation table records who owns what in a company: shares by class and holder, options granted and outstanding, warrants, convertible instruments, and what each of those becomes on a fully diluted basis. It starts as a spreadsheet with four rows and becomes, over a few years, the document a due diligence process is built around.
What makes it consequential is that it is cumulative. Every future round, option grant, secondary sale and exit is computed from it, so an error made early does not stay small — it propagates through each subsequent calculation until somebody reconciles the table against the underlying documents and finds it. That reconciliation almost always happens during a transaction, at the least convenient moment.
They are consistent across companies: option grants made verbally and recorded later at a price nobody documented, a pool increase approved in a board minute that was never reflected in the table, a departed founder’s unvested shares never repurchased, a SAFE that converts on terms different from the one the model assumed, and shareholder names recorded informally rather than as the legal entity that actually holds the shares. None of these are exotic, and all of them cost time and negotiating position when found by a buyer’s counsel rather than by you.
The cap table is downstream of the corporate documents, not the source of truth. Where the two disagree, the signed document governs — which is why the table should be reconciled to the document file at least annually, and always before a round.
A fully diluted figure is only meaningful with its assumptions attached: whether the unissued option pool is included, whether convertibles are converted at cap or at discount, and whether the pool increase agreed for the round is pre-money or post-money. Different parties in the same negotiation routinely quote different fully diluted percentages, all arithmetically correct, because they are using different assumptions. State yours on the table itself rather than defending them from memory in a meeting.
A spreadsheet is entirely adequate for a small company, provided it is reconciled and its history is preserved. Ettex Sheets holds the table with scenario columns rather than overwritten cells, Ettex Records keeps the signed grants, consents and agreements each row refers to, and the modelling of a coming round is covered in pro forma cap table. Past a certain complexity — several classes, many option holders, secondary transactions — a dedicated equity management product is worth the cost, and its main value is precisely the reconciliation this post is about.
Being direct: this is a spreadsheet and a records file, not equity management software, and none of it is legal or tax advice. Share issues, option grants and conversions are legal acts, and the documents rather than the table determine what was actually issued.
A record of a company’s ownership — shares by class and holder, options, warrants and convertible instruments, with fully diluted totals.
Ownership assuming all options, warrants and convertibles are exercised or converted. It depends on stated assumptions, particularly about the unissued option pool and conversion terms.
Undocumented option grants, pool increases approved but not recorded, unrepurchased founder shares, misassumed convertible terms and informal holder names.
When multiple classes, many option holders or secondary transactions make reconciliation to the documents unreliable by hand.
The term sheet decides your ownership through three mechanics most founders model wrongly: the option pool, the conversion of earlier instruments, and whether the pool is pre or post money.
Estimates are paid monthly and reconciled once a year. The statement that arrives without a breakdown is the one that gets disputed, and the lease usually gives the tenant a deadline to do it.
The mod compares your losses to what a business your size is expected to have. Frequency moves it more than severity — which is the opposite of what most employers assume.