Cap Table Management Guide

CAP TABLE FUNDAMENTALS

Understanding Cap Tables

CAP TABLE FUNDAMENTALS

WHAT IS A CAP TABLE?
☐ Record of company ownership
☐ List of all equity holders
☐ Shows share classes and counts
☐ Tracks options and warrants
☐ Basis for dilution calculations

WHY CAP TABLE ACCURACY MATTERS:
☐ Legal compliance (SEC, state)
☐ Fundraising due diligence
☐ Employee compensation accuracy
☐ Exit/liquidity calculations
☐ Tax compliance (409A)
☐ Board governance

CAP TABLE COMPONENTS:

1. SHARE CLASSES
   Common Stock:
   ☐ Founder shares
   ☐ Employee exercised options
   ☐ Advisor shares

   Preferred Stock:
   ☐ Series Seed
   ☐ Series A
   ☐ Series B (etc.)

2. OPTION POOL (ESOP)
   ☐ Authorized shares
   ☐ Granted (allocated)
   ☐ Exercised
   ☐ Available (unallocated)
   ☐ Cancelled/forfeited

3. OTHER INSTRUMENTS
   ☐ Warrants
   ☐ SAFEs (converted or unconverted)
   ☐ Convertible notes
   ☐ RSUs

FULLY DILUTED CALCULATION:
Outstanding shares
+ All options (granted)
+ All warrants
+ SAFEs (as-converted)
+ Convertible notes (as-converted)
= Fully diluted shares

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CAP TABLE STRUCTURE

Comprehensive Cap Table Template

CAP TABLE SUMMARY

Company: _______________
As of: _______________
409A FMV: $_____ /share
Last valuation: _______________

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OWNERSHIP SUMMARY:

| Category | Shares | % (Basic) | % (Fully Diluted) |
|----------|--------|-----------|-------------------|
| Founders | _____ | ___% | ___% |
| Employees | _____ | ___% | ___% |
| Seed Investors | _____ | ___% | ___% |
| Series A | _____ | ___% | ___% |
| Series B | _____ | ___% | ___% |
| ESOP (Unallocated) | _____ | ___% | ___% |
| Other | _____ | ___% | ___% |
| **TOTAL** | _____ | 100% | 100% |

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DETAILED OWNERSHIP:

FOUNDERS:
| Name | Shares | Class | % | Vesting Status |
|------|--------|-------|---|----------------|
| | | Common | ___% | ___% vested |
| | | Common | ___% | ___% vested |

INVESTORS BY ROUND:
| Investor | Round | Shares | % | $ Invested |
|----------|-------|--------|---|------------|
| | Seed | | ___% | $_____ |
| | Series A | | ___% | $_____ |
| | Series B | | ___% | $_____ |

OPTION POOL:
| Category | Shares | % of FD |
|----------|--------|---------|
| Authorized | _____ | ___% |
| Granted | _____ | ___% |
| Exercised | _____ | ___% |
| Available | _____ | ___% |

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OUTSTANDING OPTIONS:
| Employee | Grant Date | Shares | Strike | Vesting |
|----------|------------|--------|--------|---------|
| | | | $____ | ___% |
| | | | $____ | ___% |
| | | | $____ | ___% |

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CONVERTIBLE INSTRUMENTS:
| Holder | Type | Amount | Cap | Discount | Conversion |
|--------|------|--------|-----|----------|------------|
| | SAFE | $____ | $__M | ___% | Pending |
| | Note | $____ | $__M | ___% | Pending |

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CAP TABLE MANAGEMENT PROCESS

Ongoing Management Checklist

CAP TABLE MANAGEMENT PROCESS

DAILY/AS-NEEDED:
☐ Process new option grants
☐ Record exercises
☐ Process terminations/forfeitures
☐ Update for any transactions

MONTHLY:
☐ Reconcile cap table to records
☐ Review pending transactions
☐ Update employee option status
☐ Check for vesting milestones

QUARTERLY:
☐ Full cap table reconciliation
☐ Board reporting
☐ Review ESOP utilization
☐ Forecast pool needs

ANNUALLY:
☐ 409A valuation refresh
☐ Full audit/reconciliation
☐ Year-end option grant timing
☐ ESOP pool assessment
☐ Cap table cleanup

EVENT-DRIVEN:
☐ Financing rounds
☐ M&A activity
☐ Secondary sales
☐ Option pool expansion
☐ Employee departures

Document Management

CAP TABLE DOCUMENTATION

REQUIRED DOCUMENTS:

For Each Equity Holder:
☐ Stock purchase agreement
☐ Stock certificate (or book entry)
☐ 83(b) election (if applicable)
☐ Spousal consent (if applicable)

For Options:
☐ Board approval
☐ Option agreement
☐ Grant notice
☐ Exercise agreement (when exercised)
☐ 409A valuation at grant

For Investors:
☐ Subscription agreement
☐ Stock purchase agreement
☐ Investor rights agreement
☐ Voting agreement
☐ ROFR/Co-sale agreement

For SAFEs/Notes:
☐ SAFE or note agreement
☐ Conversion notice
☐ Cap table update upon conversion

FILING REQUIREMENTS:
☐ State securities filings
☐ Section 83(b) elections (within 30 days)
☐ SEC filings (if applicable)

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409A VALUATION

409A Management

409A VALUATION MANAGEMENT

WHAT IS 409A?
Section 409A of the Internal Revenue Code
requires options be granted at fair market value.
409A valuation establishes FMV.

WHEN TO GET 409A:
☐ Before issuing first options
☐ Annually (12-month validity)
☐ After material events:
  - Financing round
  - Significant revenue change
  - Major customer/contract
  - Acquisition discussions
  - IPO preparation

409A BEST PRACTICES:
☐ Use reputable valuation firm
☐ Engage board-approved provider
☐ Allow 2-3 weeks for completion
☐ Document all inputs/assumptions
☐ Board approves valuation
☐ Time grants with fresh 409A

GRANT TIMING:
Option grants should follow fresh 409A
Don't grant in "stale" 409A window
If material event, wait for new 409A

409A TRACKING:
| Valuation Date | FMV/Share | Valid Until | Notes |
|---------------|-----------|-------------|-------|
| | $____ | | Initial |
| | $____ | | Post-Seed |
| | $____ | | Post-Series A |
| | $____ | | Annual |

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COMMON ISSUES

Cap Table Problems to Avoid

CAP TABLE COMMON MISTAKES

1. MISSING DOCUMENTATION
Problem: Grants without proper docs
Impact: Invalid grants, tax issues
Fix: Document checklist, audit

2. STALE 409A
Problem: Options granted at old FMV
Impact: Tax penalties for employees
Fix: Regular refresh, timing discipline

3. MATH ERRORS
Problem: Percentages don't add up
Impact: Investor disputes, audit issues
Fix: Cap table tool, regular reconciliation

4. FOUNDER VESTING GAPS
Problem: No vesting or incomplete docs
Impact: Investor concerns, co-founder disputes
Fix: Standard 4-year vesting, proper docs

5. ESOP TRACKING ERRORS
Problem: Pool utilization miscalculated
Impact: Over-granting, dilution surprises
Fix: Regular reconciliation, tool tracking

6. SAFE CONVERSION CONFUSION
Problem: Unclear when/how SAFEs convert
Impact: Dilution surprises
Fix: Model conversions, maintain tracker

7. MISSING APPROVALS
Problem: Grants without board approval
Impact: Invalid grants, governance issues
Fix: Board consent process

8. SECONDARY SALE MESS
Problem: Untracked secondary transactions
Impact: Cap table inaccuracy
Fix: ROFR enforcement, transfer tracking

PREVENTION CHECKLIST:
☐ Use cap table management software
☐ Regular reconciliation (monthly minimum)
☐ Document every transaction
☐ Board approval for all grants
☐ 409A timing discipline
☐ Legal review for complexity

Cap Table Health Check

Item	Status	Last Review	Action Needed
All docs complete	☐ Y ☐ N
409A current	☐ Y ☐ N
Reconciliation done	☐ Y ☐ N
ESOP tracking accurate	☐ Y ☐ N
Board approvals current	☐ Y ☐ N
Cap table tool updated	☐ Y ☐ N

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