Notes

Investing in Startups - Using a Cap Table spreadsheet to Diversify Your Capital
Introducing the Cap Table spreadsheet and hiring a CFO. As Finance Fridays continues so many more companies are introducing the thought of the Cap Table. This week they just set out with the intention to make their cap sheet bigger and hire someone to convert it into a nice format for shareholders to read. All well and good but what if you aren't one of those people?

Are you one of those who prefer simple spreadsheet like tools? You are in luck. There are plenty of different cap tables and you can use them on any of your spreadsheets. Why would you want to convert a nice and simple cap table into one that requires a program? The answer is simple - you want to build your team.

I know what you are thinking. Everyone talks about the dilution of the startup capital and you don't need to worry about dilution when it comes to cap tables. You can't lose money on dilution. So why would you want to convert your nice and simple cap table into something that takes up a lot of space? Well the answer is simple - you are building your team and you want to make sure you have all the information you need to make a good decision.

You might think that the purpose of a cap table spreadsheet is to give investors an idea of your business operations. While it is true that investors can obtain this information from your CPA tables, that information is of little use if you aren't going to use it. For instance - let's say that you have two Cap Table Spreadsheets that contain information on the following Cap Numbers: XYZ and ZYZ. Now what you need is to find the value of each of these numbers based on some fundamental analysis.

First of all, I want to point out that investors often misconstrue Cap Table spreadsheets as being sales or balance sheet reports. While they may contain information that is close, they are designed to provide investors with the general idea of your organization's finances. As such, they will not provide you with information on the day to day financial performance. Investors often think that a Cap Tables spreadsheet provides them with a comprehensive view of your venture, but it really doesn't.

Instead, a Cap Table spreadsheet is a summary of your organization's finances. It presents the information in a way that makes it easy for investors to understand and make decisions on. If you aren't already using corporate governance software, then you need one. In my opinion, the best choice for a business that wants to facilitate funding rounds is to get a cap table management software solution.

What makes Cap Table Excel so powerful as a management tool is that it organizes and condenses large amounts of information into a usable format. In many cases, you can have dozens of different views and columns. That way, you can create an easily understood graphic presentation showing how much equity you have diluted, how much cash flow is left, and other important metrics. You can also drill down in the Cap Table to reveal all kinds of other details, such as current and historical diluted equity, and possible future scenarios involving dilution. Many investors don't fully understand the complexities of exit scenarios, and they would greatly benefit from a comprehensive cap table report.

Of course, there is no real guarantee that a comprehensive Cap Table spreadsheet will solve all of your funding problems. However, a useful piece of software will make it much easier to manage potential funding issues with a well laid out plan. In my opinion, the only way to make any kind of investment decision is to do your homework. A cap table can help you do that. If you are looking to raise startup capital or work with new startups , this is one of the few investment tools that you should not overlook.
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