What the Cap Table Actually Is

A capitalisation table (cap table) is a record of who owns what percentage of your company — and on what terms. At its most basic, it's a spreadsheet. At its most complex, it's a legal document that determines how proceeds are distributed in an acquisition, who has control in shareholder votes, who can block decisions, and how every future equity issuance dilutes existing holders.

Founders typically underestimate the cap table until something goes wrong. And by the time something goes wrong — an investor asks for it in diligence, a co-founder exits, or a round is about to close — fixing the errors is expensive, time-consuming, and sometimes impossible without the consent of parties who have since become adversarial.

The Most Common Cap Table Errors

1. Informal Equity Promises Not Documented

Early conversations about equity — with co-founders, early employees, advisors, or angel investors — are often oral. "You'll get 2%" is easy to say and easy to forget to document. When a Series A investor asks for a list of all outstanding equity commitments and you have to remember a conversation from three years ago, problems multiply.

Every equity commitment must be documented contemporaneously with a signed agreement. This includes co-founder agreements with vesting schedules, advisor agreements, ESOP grant letters, and convertible note agreements.

2. Vesting Not Applied to Founders

Founder vesting is one of the most important — and most resisted — structures in early-stage company building. Every institutional investor will expect founders to have vesting schedules. If a co-founder leaves early without a vesting schedule in place, they may walk away with a permanent, undiluted equity stake that hangs over the company's capital structure for years.

Standard: 4-year vesting with a 1-year cliff. The cliff means no vesting in the first year; after 12 months, 25% vests, with monthly vesting thereafter.

3. Incorrect Round-by-Round Dilution Calculations

Cap tables maintained in Excel are particularly prone to errors when new rounds are modelled. Mistakes include: not accounting for option pool top-ups agreed as part of a round (which dilute existing holders), incorrect pre-money vs. post-money calculations, and failure to reflect anti-dilution adjustments from prior rounds.

A cap table error that gives a founder 1% more than they actually own is embarrassing at best and litigated at worst. Always reconcile your cap table to the company's register of members and every share allotment form filed with the RoC.

4. Option Pool Not Tracked Correctly

ESOP pool shares are often reflected as "issued" in the cap table before they are actually granted. Ungranted pool shares are authorised but unissued — they should be shown separately and should not reduce the percentage holding of existing shareholders until actually granted.

5. Convertible Instruments Not Modelled

SAFEs, CCDs, CCPS — these all represent future dilution that doesn't show up as current ownership but is very real. Every convertible instrument outstanding should be modelled in the cap table with its conversion terms, so that every holder can see their fully-diluted ownership at any time.

What Investors Actually Look For

When an institutional investor requests your cap table, they are checking for:

  • Who owns what, fully diluted: Including all outstanding options (vested and unvested), warrants, and convertible instruments on an as-converted basis.
  • Vesting schedules: For all founders and key employees with unvested equity.
  • Waterfall analysis: How proceeds would be distributed in a sale at various valuations, taking into account liquidation preferences.
  • Clean documentation: Every line item on the cap table should correspond to a signed agreement and a RoC filing.

Tools and Best Practices

For early-stage companies, a well-structured Excel model is adequate. As complexity increases, dedicated cap table tools (Carta, Ledgy, Qapita) become valuable for tracking grants, modelling dilution scenarios, and producing investor-ready outputs.

The most important practice is simple: update your cap table every time anything changes. Every new grant, every exercise, every convertible note, every transfer. Don't let it accumulate errors across multiple versions of a spreadsheet.

This article is for informational purposes only and does not constitute legal, tax, or financial advice. Please consult with a qualified professional for advice specific to your situation. Maroon Advisors would be delighted to assist — get in touch.