Notes

Startup Capitalizing
A Capital Tables is a financial report given to investors that compares the net worth and equity value of different types of business entities. There are various types of Capital Tables such as the equity weighted, the fair market value, the cost or premium, the debenture-equity table, the retained earnings table, and the other such tables. A Capital Tables helps investors make decision on the type of business to invest in and helps them judge the financial health or potential of different companies. Capital Tables are extremely important to the success of any investment. Without the availability of a Capital Tables, investors would not be able to evaluate different companies and their investments. However, for those who run small businesses or have a limited knowledge about the financial health of different companies, Capital Tables are essential to the choice of business entity.

The capital table shows the percentage of diluted shares owned by each of the shareholders as compared with the overall value of the business. A higher percentage of diluted shares indicates that there is some dilution of ownership. Dividuation is an alteration of value by changing the stock owner's percentage of ownership in the company. The cap table shows the net worth of the company divided by its outstanding shares of equity. Net worth is the difference between total assets and total liabilities. Each of the shareholders owns a part of the business; therefore the net worth of the business is also the sum of all the shareholders' equity.

A Capital Table also provides information on the exercise price, discount rate, initial purchase cost, and discount rate for common stock options. It also shows the net effect of exercising stock options during the early stage of the investment. If an investor purchases shares from the company during the early stage, he pays for the full amount as capitalized cost; however, if he purchases shares later, he pays only the difference between capitalized cost and the actual strike price. Investors can determine the exact cost of an option by subtracting the exercise price from the strike price.

The historical capital table shows the average shareholding pattern of the company. The pattern shows a strong revenue-to-income ratio, high average dividend yield, high market cap, low debt, low profit margin, stable earnings growth, and limited liability. This information is important for investors who are determining the capital structure and share holdings because the capital table usually shows the historical average. The historical data is important because the patterns may not be applicable to current issues or to the current business climate.

The Valley View Capital Inventory Model (VAM) and venture capital tables are used to calculate the discount rates, risks, revenues, and exit prices for companies in different stages of development. VAM is based on the historical performance of the company along with inputs such as capital structure, valuation of equity, and liquidity metrics. The Valley View requires rigorous mathematical analysis to calculate the discount rate. The venture capital table shows the location, sector, valuation, funding source, valuation of the entrepreneur, venture capital investors, and valuation of shares.

A good Valley View Capital Model should be able to: accurately forecast the future revenues and profits of an enterprise, identify the attributes of a unique business model that have proven successful in similar situations, provide information on potential competitors, forecast trends in the marketplace, predict market timing, determine whether the market leader will continue to lead in earnings and price, explain why a venture should be chosen over other businesses, and provide a clear picture of where the company should eventually go after it has been established. A spreadsheet version of the capital table is also available. It can be used for allocating resources between different companies. It can be used to compare and contrast different companies and their attributes. The spreadsheet can be used to compare two companies in the same industry, or different industries. It can also be used to compare unrelated companies within the same or different industries.

Another useful tool in startups is the capitalization table. The capitalization table gives investors an idea of the ownership stake of each partner in a startup. This type of ownership is usually very fluid and highly leveraged. It may not be feasible for startup s to raise large sums of money from angel investors or venture capitalists, as these individuals are usually involved in the ownership structure of the company.

Capitalizing on startup incubators, accelerators, and accelerators is one way to increase the level of equity capital available to startups. These entities typically have relationships with existing venture capital firms and angel investors. They can provide funding in exchange for a percentage of the business. Therefore, it is imperative that entrepreneurs understand what types of negotiations and offers they can make to raise capital.
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