A capitalization table — cap table for short — is the canonical record of who owns what in your company. It lists every common shareholder, preferred shareholder, option holder, warrant holder, and holder of convertible securities (SAFEs, notes).

Why the cap table matters

1. It defines dilution at every round.
2. It’s the primary artifact of investor diligence.
3. It’s legally binding — errors compound into litigation.
4. It drives exit economics — who gets paid what and when.

What a proper cap table includes

• Common stock holders (founders, early employees).
• Preferred stock holders (Series Seed, A, B, C, etc.).
• Options — granted (vested and unvested) and available pool.
• Warrants (common with venture debt and strategic deals).
• Convertible securities — SAFEs and notes with their conversion mechanics.
• Ownership percentages on both outstanding and fully diluted bases.

Outstanding vs fully diluted

• Outstanding shares: Shares currently issued and exercised.
• Fully diluted shares: Outstanding + unexercised options + unallocated pool + warrants + SAFEs/notes converted at current cap.

Investors almost always price rounds on a fully diluted basis, including a new post-money option pool that dilutes founders but not investors.

How a priced round affects a cap table

Assume:

• Pre-round fully diluted shares: 10M.
• You raise a $5M Series Seed on $15M post-money (so $10M pre-money).
• Investors demand a 10% post-money option pool top-up (shuffled into pre-money).

Steps:

1. Compute new options required post-close = 10% × post-money total shares.
2. Adjust pre-money to absorb those options (they come out of founders’ share).
3. Issue new preferred shares to investors equal to $5M / (10M post-money).

Result:

• Investors: ~33.3% (5 / 15).
• New + existing option pool: ~10%.
• Founders / earlier holders: ~56.7% (diluted).

Common mistakes

1. Not tracking SAFE stack — each SAFE’s post-money conversion must be modeled.
2. Inconsistent share counts between cap table software and board-approved grants.
3. Option grants without board resolutions — these can be invalid.
4. Ignoring 409A valuation — option strike prices must be supported.
5. No founder vesting — at priced rounds investors will require it retroactively.

Cap table software

• Carta: U.S. market leader; priced-round friendly; expensive.
• Pulley: YC-backed; competitive pricing; strong SAFE modeling.
• AngelList: Solid for syndicates and early rounds.
• Ledgy / Capdesk: EU-focused.
• Spreadsheet: Fine pre-seed, but migrate before Series A.

What to send investors

For any round, prepare:

1. Current cap table (outstanding + fully diluted).
2. Pro-forma cap table post-round with all new issuances modeled.
3. Waterfall analysis — who gets what at various exit scenarios.

Practical takeaway

1. Founders: Keep your cap table accurate and live. Surprising your next investor is the fastest way to kill trust.
2. Investors: Always re-verify cap table in diligence — use the company’s lawyer, not just the founder’s spreadsheet.
3. Operators: Before signing any SAFE, run a dilution model two rounds forward.

Further reading

• NVCA model documents: https://nvca.org/model-legal-documents/
• Carta market reports: https://carta.com/data/