Fri, 21 May 2021
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.
Investors review the cap table as part of their diligence process.
They look for the following in the cap table:
The founders have a large enough stake that keeps them motivated.
Those who have very little ownership will most likely not stay with it for the long haul.
The right people need to have enough equity to make the business successful.
The founders should have 40-50% - or greater - after the Series A.
There shouldn’t be too many people on the cap table in early-stage companies.
There should be no shell companies.
For those who want to use crowdfunding, make sure you create a special purpose vehicle for gathering them into one place on the cap table.
Show the cap table in its fully-diluted form so as to include options, warrants, and restricted stock.
There should not be too much dilution from the investors coming in especially in the early stages.
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