Notes

A Simple Cap Table Template and Waterfall Analysis
A simple cap table is the technical name given to the method of computing numbers each equity and debt holder is to be paid upon a liquidation event of the business (e.g. an acquisition, an IPO, et cetera). Essentially startups 's just a sequence of complex mathematical computations where you use the different deal terms for the cap table in order to streamline the entire thing to the end result. It's like in computer programming where you'll use a spreadsheet program to determine the output you want from a mathematical equation.

In order to make your own simple cap table, you first need to download a cap table template. These are spreadsheets that lay out all the terms of a particular share or ownership entity. In this case, you're assuming that you have one of several entities. Some are publicly traded while others are not. There may be one that is a private company but it's usually listed in the stock market so you can easily locate it using any search engine.

After you've downloaded a cap analysis template, open it up in your spreadsheet program. Most spreadsheets are ready to customize so just enter in the capitalization, ownership shares, initial price per share, and EPS or revenue per share as well as the dividend yield and lock dividend schedules of each partner. If you're dealing with private companies, you can also enter in historical earnings and revenue numbers as well as dividends paid. The final step is to just click on the "Calculate" button and you have your simple cap table!

Now, don't be too proud if you know next to nothing about investing or even how the stock market works. Most people who make use of these simple cap tables have little to no experience and they don't understand how they came up with the values for their preferred stock picks. Don't be embarrassed though; this is the same type of thing that any day trader does. In fact, there's a whole industry built on creating these maps and charts.

However, if you're familiar with the stock market you're probably already aware of fully diluted caps. These types of tables take into account the value of a company in a diluted state. For instance, let's say that Company X buys some property in town and later has its equity and ownership in the property increased by 100%. This means that the company would be diluting its ownership in town and would now be valued on a fully diluted basis. A simple cap table for this scenario would look something like this:

Per million shareholders: Company X is issued warrants in an amount of one million and three quarters shares. At this point in time, there are only two holders of each warrant. One holder is holding his or her warrant as an early stage company and the other holder is holding his or her warrant as a late stage company. Therefore, the person with the warrant is now considered to be the early stage company while the person with the shares is now considered to be the late stage company. This is how a simple cap table for this scenario would look.

Now, the next scenario would be the reverse. If Company X were to issue shares to all of its shareholders and then have its shareholders sell those shares before it ever purchased any property, then this would count as a company with dilution. The simple cap table template will allow investors to see which scenarios give them the best potential for profit.

startups : If Company X had purchased the property at an early stage and then had its shareholders sell all of their shares before it purchased any property, then the number of per million shareholders becomes the dilution number. Therefore, if Company X had purchased 100 million shares at an early stage, then its shareholders would all receive one million shares. A waterfall analysis should be used when determining this number. In general, a waterfall analysis considers only the last portion of a price and considers the total number of shares outstanding during that period of time. This will yield a better value on the value of the holding.
Here's my website: https://myemotion.faith/wiki/The_Role_of_Cap_Table_Management