Fundraising with a clean Cap Table
A cap table is a record of who owns what in a company.
By Tina Nyamache and Marvin H. Coleby (@seathemc)
We’ve all heard about cap tables… and usually, they sound scarier than they actually are.
A cap table is a record of who owns what in a company. It is a core database of the most important part of your startup: share ownership.
Sounds simple, right?… Well, because it is.
A cap table is usually a table that records the terms and conditions of all of the convertibles, options and shares issued by the company. Those terms get complicated, especially when you need to add, divide and subtract with weird calculations and bizarre words get to the final percentage ownership of the company. Cap tables quickly start to look like one big algebra equation.
(Okay, okay… we may have exaggerated a bit — cap tables can get complicated)
But usually, a well-built cap table will do all the work for you. A well-built cap table or “clean” cap table is typically one true and highly accurate version. It will show every founder, investor and stakeholder what they care about: their percentage ownership of the company.
The percentage ownership usually determines the most critical events in the company, like how much everyone is paid when your startup exits or who votes on what issues. It’s essential to manage a clean cap table at all times.
We see a lot of cap tables at Raise. We work with founders throughout Africa to clean up their cap tables and verify it against their contracts and legal documentation. The majority of the entrepreneurs we work with still used excel sheets to manage their cap table.
As your startup grows, so will the cap table and your excel sheet may not be enough to keep the cap table clean (unless you are a Microsoft Excel Ninja!)
We’re founders too, so we get that it’s easy for the cap table to slip through the cracks. But always remember that a clean cap table will support you when it’s time to fundraise. Here are some easy tips to get started on your clean cap table:
- Sign up to Raise: to get started on building your clean cap table, click here. Raise is a suite of digital tools that simplify the fundraising process. One of those tools is an automated cap table built to record share ownership data across countries like Mauritius, Kenya, Nigeria and South Africa. Our team of cap table experts move you past the need for messy excel sheets and manual data entry across multiple sheets.
- One version of the cap table: always keep one authentic version of the cap table in an online editor like Googles Sheets. Be sure to limit who can view and edit this sheet. It happens where different parties accidentally make changes to a cap table, throwing off numbers and calculations. This is a problem, especially since there’s no way of knowing which cap table is the correct version.
- Use a template: always use a well-built template for cap tables. We don’t recommend inputting in fields and calculations manually.
- Speak to your corporate secretary: if you’re in Kenya, Nigeria, South Africa or Mauritius, you should speak to your corporate secretary or law firm about your latest cap table version. Don’t wait until there are mistakes. We promise it’ll be expensive to fix them later;
- Learn, learn, learn: founders should always take the time to understand their cap tables and the basics of financing. You’ve all seen standard terms like; common shares, preferred shares, options, participation rights, voting rights, liquidation preference, or warrants. If you have no idea what these words are, you should take some time to get familiar with them because knowledge is power.
#raisetip
Reduces the headache in updating and maintaining spreadsheets today. At Raise, you can have all the complicated calculations done for you. Click here to start your sign up.
Until the next post! #keepbuilding.
DISCLOSURE: This communication is on behalf of Raise Impact Technologies Inc. (“Raise”). This communication is not to be construed as legal, financial or tax advice and is for informational purposes only. This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Raise does not assume any liability for reliance on the information provided herein.
