In essence, a capitalization table demonstrates the snapshot of an ownership structure of an enterprise. The cap table is widely used by entrepreneurs, venture capitalists, and investment bankers to model and to analyze such events as ownership dilution, issuing employee stock options, or issuing new securities. After several rounds of financing a company, its cap table may be highly complex.
As a cap table becomes more complex, the ownership percentages indicated on the cap table can correlate less and less to the actual percentage of proceeds distributed to shareholders upon a liquidity event. Some industry commentators have called the difference between actual ownership percentage on the cap table and a shareholder's percentage of exit proceeds "accounting ownership" (actual ownership percentage on the cap table) vs. "economic ownership" (percentage of proceeds available to equity). This leads to the concept of a "waterfall" or "waterfall analysis." A waterfall analysis details the exact payouts to every shareholder on a company's cap table based on a specific amount of proceeds available to equity in a particular liquidity scenario. Since a company often does not know if, when, or how it will achieve a liquidity event, waterfall analysis typically covers a range of liquidity assumptions.
- How to make a cap table
- Capography Helps Entrepreneurs Manage Their Cap Table Without The Excel Headache
- Sample capitalization table on a spreadsheet
- Cap table of Everpix
- An online tool for managing your startup's cap table in the cloud