Cap Table
Also known as Capitalization Table, Cap-Table, Capitalization
A capitalization table is the official record of every security a company has issued: common shares, preferred shares (by series), options granted, options reserved in the pool, warrants, convertible notes, and SAFEs. It shows who owns what, at what price, with what restrictions, and on what basis (issued, outstanding, or fully diluted). It is the master ledger that every financing, exit, and equity grant runs through.
Formula
Fully Diluted Ownership % = Holder's Common-Equivalent Shares / Total Fully Diluted Shares- Holder's Common-Equivalent Shares
- Holder's common shares + as-converted preferred + vested and unvested options + warrants held
- Total Fully Diluted Shares
- All common + all preferred (as-converted) + total option pool (granted and unallocated) + warrants + convertibles on as-converted basis
In depth
A cap table is structured by security type, then by holder, then by certificate. Each row records the holder name, security type (e.g., Series A Preferred, common, option grant, warrant), share count, issue date, price per share, and any restrictions (vesting schedule, transfer restrictions, repurchase rights). Totals are computed across multiple bases simultaneously: issued, outstanding, and fully diluted.
The fully diluted view is the one everyone references in deal-making. It assumes every option is exercised, every preferred is converted to common, every warrant is exercised, and every convertible (SAFEs, notes) converts at the relevant trigger. This is the as-if-fully-exercised denominator that produces ownership percentages used in term sheets. Pro forma cap tables run a hypothetical (usually the next round) and show the resulting fully diluted ownership after the proposed transaction.
Why it matters
The cap table drives every economic decision: dilution modeling for new rounds, common-stock waterfall analysis at exit, 409A valuation for new option grants, employee equity offer letters, and stockholder consents. A cap table off by 50,000 shares can shift a founder ownership percentage by 0.5 points and produce different post-money math than the term sheet projected. Sophisticated investors run a "cap table review" as part of every priced-round due diligence; discrepancies between the company's cap table, the lawyer's records, and Carta or equivalent are routinely surfaced and slow closings by weeks.
Worked example
A simplified pre-Series A cap table:
| Holder | Security | Shares | % Fully diluted |
|---|---|---|---|
| Founder A | Common | 4,500,000 | 37.5% |
| Founder B | Common | 2,500,000 | 20.8% |
| Seed investors | Series Seed Preferred | 2,000,000 | 16.7% |
| Granted options | Common (vested + unvested) | 1,800,000 | 15.0% |
| Unallocated pool | Common (reserved) | 1,200,000 | 10.0% |
| Total | 12,000,000 | 100% |
Issued shares: 4.5M + 2.5M + 2.0M = 9,000,000. Outstanding shares: same 9,000,000 (no treasury). Fully diluted: 12,000,000 (adds the 3.0M of options, both granted and reserved).
Founder A's stake at each basis:
% issued / outstanding: 4,500,000 / 9,000,000 = 50.0%
% fully diluted: 4,500,000 / 12,000,000 = 37.5%
The 12.5 percentage-point gap is the cost of the option pool plus the difference between issued common and the as-converted preferred. Every term sheet that quotes "founder owns 37.5%" is using the fully diluted basis; quotes on any other basis are usually misleading.
Frequently asked
What is the difference between issued, outstanding, and fully diluted shares?
Issued shares are all shares the company has ever sold or granted, including any held in treasury. Outstanding shares exclude treasury and exclude unexercised options. Fully diluted includes everything on an as-converted, as-exercised basis: outstanding plus the entire option pool (granted and unallocated) plus all warrants and convertibles as if exercised or converted. Ownership percentages quoted in term sheets are almost always on a fully diluted basis.
What does a cap table not show?
Convertible notes and SAFEs are tricky. They count toward fully diluted on an as-if-converted basis, but the conversion math depends on the next priced round's terms (valuation cap, discount, MFN), so the share count is illustrative until the round prices. Sophisticated cap-table tools (Carta, Pulley, Capdesk) model the full as-converted scenario at multiple priced-round assumptions to show the real dilution range.
How does a cap table change at each financing round?
Two events per round. The option pool is refreshed (creating new reserved shares on the pre-money or post-money basis), and new preferred is issued to investors at the round price. Existing holders are diluted by both. Pro forma cap tables run the round before signing to show every holder their new ownership percentage at the new fully diluted total.
Who maintains the cap table?
At seed stage, often a spreadsheet maintained by the founders' lawyer. By Series A, most companies migrate to Carta, Pulley, or a similar equity-management platform that handles 409A valuations, option grants, exercises, and stockholder communication. Investor due diligence demands a clean, accurate cap table; sloppy versioning is a routine cause of round delays.