Tue, 11 May 2021
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.
As the startup grows it will add new entries to the cap table including new hires, option pools, advisors, as well as new investors.
Here’s a list of potential changes to the cap table to watch for:
New hires and options pools must be added.
Employees who leave before all options are vested will have unvested shares come off the cap table.
Advisors to whom you grant options or give warrants must be added.
Convertible notes are debt instruments but hold the potential of converting to equity so must be added.
New shares issued must be added to the cap table such as common stock.
If there’s a transfer of shares, those changes must be reflected in the cap table.
If you issue dividends you must track these as well.
You must also track liquidation preferences and the existence of anti-dilution clauses as these have a major impact on ownership.
To account for contingencies in the cap table you should run a “fully diluted” cap table.
This shows the impact of all options and warrants being exercised and all convertible notes converting to equity.
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