Notes

Fundraising 101 - Using a Cap Table Template to Calculate Ownership Interest
Simple Cap Table? Maybe a simpler term to explain it would be "how to calculate the cap amount of a company". This series of calculation can be extremely complex given the number of terms involved. In fact, I can't even begin to explain it here.

In order to properly explain this, I must first take a brief moment to explain what a cap table template is. A cap table template is a spreadsheet that is used to create a dynamic, easily understood presentation that can be used for all sorts of cap analysis presentations. It simplifies the complicated process of doing mathematics on shares by presenting it in a simple and understandable manner. Many business executives use them to help them present their findings to key members of the organization in a way that is easy to understand.

The purpose of using a cap table template is two fold: First, it simplifies the process of sharing a company's ownership as well as its dividend payments. Unfortunately, simple cap tables are not widely used because many people feel they are too complicated and confusing. This is simply not true. In fact, there are many different types of cap tables that can be used and presented in a manner anyone of reasonable intelligence can understand. Once they understand how it works, they realize they can then use it to do their own analysis if they so choose.

Also, this series of calculations is a great tool for performing a liquidity event study. The purpose of doing such an event study is to basically calculate the net effect (liquidity) of a company's current stockholders over time. Doing such a study basically involves calculating the change in value (net worth) of a company over the period of one year up to 30 years, depending on how the stockholders voted on issues. To calculate the net worth of the stockholders at any given time, all you have to do is plug in a company's yearly performance data and do some quick back-room calculations.

However, one thing you may want to keep in mind when looking into doing a cap table yourself is that all you are actually doing is replacing the numerically based percentage of ownership for a real, physical, tangible object (i.e., the equity). Thus, there are two things to keep in mind when you are performing such a table. First, when you are computing the value of your company, you should only use theequity basis. This means that you must either use the market value of whatever it is your company is trading for or whatever the cost of your own shares will be if you owned them directly.

Also, when you use the equity or common stock basis for computing the value of your company, you must look at the cost of your preferred stock. The difference between the price you paid for it and what you are paying now for it will tell you what your common stock should be worth. If it was worth one dollar before, you now owe it the exact same amount you had before. Therefore, whenever you compute a simple cap table, you must also look at the cost of your preferred stock. This way, you will be able to compute it exactly.

Unfortunately, calculating simple cap tables for startups is not as simple as it sounds. Because most startup s are not public, their shares are not listed with the major stock exchanges. However, small cap and micro cap startup s can still be found through a "private" marketplace such as OverTheCounter (OTC) securities or through specialty finance companies that specialize in new business offerings. These companies will often work with startup founders to help them find their feet in the industry and provide capital raising and related services.

Now that you understand the basics of how a cap table template works, you may be wondering what you should look for in a template. First, make sure that the template is customizable in terms of both length and number of columns. Second, it should allow you to change the ownership percentage of your company at any time, whether during the life of the fundraising event or at a later date. Third, it should have an easy-to-read graphic layout that lets you see exactly who are your stakeholders at every step of the way. Lastly, it should be easily downloadable so that you can copy and paste the data into your own spreadsheet. By taking these simple steps, you can ensure that your fundraising efforts will be successful.
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