Where does the cap table industry go now? The Open Cap Table Coalition should lead the way

Cap tables summarize some of the most sensitive information in a private company: who owns what. In light of recent conversations with our clients about how cap table platforms can use their data, we want to share some ideas for improving transparency and control over cap table data and how the industry should implement them.

Several years ago, Gunderson Dettmer co-founded a project with our peer firms and the major cap table vendors to collaborate in a pro-competitive way to solve problems in the cap table space. This project grew into the Open Cap Table Coalition, a group of over 50 law firms, software companies and financial institutions who work with cap table data. We have volunteered well over a thousand hours of our firm’s time and our engineering resources to further the Coalition’s stated goal of improving the interoperability, transparency and portability of cap table data.

We think the Open Cap Table Coalition can be instrumental in helping to reassure venture-backed companies and their stakeholders that their cap table data is being used as they intend. The Coalition can achieve this by developing a set of ethical standards governing the usage of customer data as well as a process for members to regularly certify compliance with those standards.

The Coalition should use the following two principles as a starting point for these standards:

1. Cap table information does not belong to Coalition members who help a company manage its cap table; it belongs to the company and its stakeholders.

We represent thousands of high-growth tech and life sciences companies. We know that the proper use of customer data has been an engine driving the modern innovation economy and think it should continue responsibly. We also understand the importance of building relationships with customers on a foundation of trust and transparency regarding the use of their data. This begins with a provider’s commitment to only use cap table data in an anonymized and aggregated form except when identifiable data is needed to provide mutually agreed services.

Taking these principles into account, we think the Coalition should require members to review — and if necessary, change — their terms of service and privacy policies to provide clarity on their use of data, as well as transparent settings for companies and stakeholders to prevent the use of their identifiable data for additional or new purposes. To ensure that data owners’ rights and choices are respected, the Coalition should also require members to maintain internal controls on which employees and vendors can access individual client and stakeholder data.

2. Coalition members should commit to competing with one another by providing the best products and services, not by data lock-in.

The Coalition should require members who offer technology solutions that store cap table data to publicly commit to a date by which they will offer secure API access to customers and their chosen vendors and service providers to export complete cap tables in the Coalition’s open-source Open Cap Table Format (OCF) data standard.

Over the last 20 years, we and our peer firms have built and managed thousands of our companies’ cap tables on the major third-party cap table software platforms. Attorneys and paralegals at firms like ours are far and away the biggest cohort of power users of the cap table platforms in the market today. We use these platforms daily to serve our clients, so we are deeply invested in ensuring that the cap table industry grows in a positive direction for the good of the entire venture ecosystem.

No industry stakeholder on its own can resolve the concerns about how cap table data is used. The Open Cap Table Coalition is best positioned to organize the key players to make the necessary changes for the good of all of our clients/customers. We look forward to that engagement and collaboration.

Authored by:

Jeff Higgins, Managing Partner, Gunderson Dettmer

Joe Green, Chief Innovation Officer, Gunderson Dettmer

Naveen Pai, Chief Knowledge Officer, Gunderson Dettmer