Cap Table
A Cap Table, short for Capitalization Table, is a foundational document illustrating the ownership structure of a company. It details the distribution of equity among investors, employees, and founders. For Indian founders, the Cap Table is a crucial financial blueprint, offering a clear snapshot of who owns what within the company.
What it Means:
The Cap Table serves as a comprehensive ledger, outlining the percentage ownership each stakeholder holds in the company. It includes equity allocations to investors, stock options for employees, and founder shares. Indian founders utilize this document to track ownership dynamics, make informed decisions, and attract new investors.
How to Calculate:
The Cap Table is not calculated in the traditional sense but is compiled and updated as ownership changes occur. To calculate ownership percentages, divide the number of shares or equity units owned by an individual or entity by the total outstanding shares or units. Mathematically, Ownership Percentage = (Number of Shares Owned / Total Outstanding Shares) * 100.
Why Measure:
Measuring the Cap Table is fundamental for Indian founders managing equity distribution. It provides transparency, aiding in strategic decision-making, fundraising efforts, and employee incentivization. A well-maintained Cap Table enhances a startup's financial health, fostering trust among current and potential stakeholders.
Examples:
Consider an Indian tech startup with an initial valuation of ₹10 crores. The founder issues 1 crore shares, and an investor contributes ₹2 crores for 20% equity. The Cap Table would reflect the founder's 80% ownership and the investor's 20%, forming the foundation for subsequent equity allocations as the company evolves.
In this scenario, the Cap Table guides the founder in understanding the ownership landscape and making informed decisions about future fundraising rounds or employee stock options, ensuring a balanced and sustainable equity structure.
In conclusion, for Indian founders, the Cap Table is a strategic tool for navigating the complexities of ownership. By maintaining an accurate and up-to-date Cap Table, founders can foster transparency, build trust with stakeholders, and navigate the evolving financial landscape of the Indian startup ecosystem.