Ten cap table mistakes, and the audit that catches them in an afternoon

Fifteen parts of theory are worth one hour of looking at your own cap table. These are the errors that actually turn up, roughly in order of how often.

1. Grants promised but never approved

Someone’s offer letter says 40,000 options. The board never approved it. Three valuation uplifts later the grant is finally made, and the employee’s strike price is four times what they were told.

Fix: every offer letter with equity goes onto a pending-grants list that is cleared at the next board meeting (part 12).

2. A pool balance that is fiction

Unallocated is computed as reserved minus granted, ignoring exercises and forfeitures. The number drifts every time anyone exercises or leaves.

Fix: track reserved, outstanding, exercised and forfeited as four separate figures (part 10).

3. Wrong vesting commencement dates

Vesting starts on the employee’s start date; the board approved the grant six weeks later; the system records the approval date. Every vested balance for that person is wrong, and nobody notices until they leave and the numbers are disputed.

Fix: treat the commencement date as its own field, and check it whenever you migrate systems.

4. Leavers never processed

Unvested options are not cancelled. Expired vested options are not returned. Your pool looks emptier than it is, and your fully diluted count is overstated — so you are negotiating your next round off a wrong denominator.

Fix: a monthly leavers pass, tied to whatever HR uses to record terminations.

5. Stale 409A

A valuation more than twelve months old, or one that predates a priced round, no longer supports the safe harbour, and every option granted off it carries tax risk for the employee.

Fix: calendar the refresh at ten months, and again immediately after each round.

6. Missed 83(b) elections

A founder or early exerciser misses the thirty-day window (part 11). There is no remedy. It surfaces years later, when someone asks for the filing copy in diligence.

Fix: a standing checklist item on every restricted-stock issuance, with the proof of mailing filed with the stock agreement.

7. SAFEs that were never modelled

Four post-money SAFEs, each reasonable alone, together committing a fifth of the company before the Series A arithmetic even starts (part 6).

Fix: a converted-SAFE column in your model, updated before signing each new one.

8. The pool top-up nobody accounted for

The term sheet says a 10% post-round pool created pre-money. The founders model their ownership without it and are two to three points out on the day of signing (part 3).

Fix: model the round with the pool, at the pool’s actual timing, before you sign.

9. Exercises recorded as options

An employee exercises; the record still shows options outstanding rather than shares issued. The share count and the option count are both wrong, in opposite directions.

Fix: exercises are a two-sided entry — options out, shares in.

10. No copy you control

Everything correct, in one vendor’s app, with no export. Then the vendor is acquired, changes its pricing, or shuts down with eight weeks’ notice.

Fix: a quarterly export in a format you can read without them, stored where your counsel and accountant can reach it.

The audit, in one afternoon

Part 1 — Four totals (15 minutes)

Write these down from your system:

1. Shares issued and outstanding
2. Fully diluted shares
3. Pool reserved
4. Pool unallocated

Check: fully diluted ≥ outstanding; authorised ≥ outstanding + reserved; granted + unallocated + exercised − forfeited reconciles to reserved.

Part 2 — Trace a sample (45 minutes)

Pick five grants, including one unusual one and one from a leaver. For each, find: the board approval, the signed agreement, the 409A supporting the strike price on that date, and the matching cap table line. Anything you cannot produce in five minutes is a finding.

Part 3 — Convertibles (20 minutes)

List every SAFE and note: amount, cap, pre- or post-money, discount, date. Model them converting at your next plausible round price. Compare the result with what you believe you own.

Part 4 — People (20 minutes)

Every leaver in the last twelve months: was unvested cancelled, was the exercise window communicated, did it expire, did the shares return to the pool?

Part 5 — The archive (10 minutes)

Export everything. Open the files. Store them somewhere you control.

What good looks like

A cap table where every line traces to a document, every total reconciles, every convertible is modelled, and the whole thing can be handed to an acquirer’s counsel without a week of preparation first.

It is not hard. It is just nobody’s job until it is urgent, and by then the errors are years old.

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That closes this series. If you want the whole thing in order, start at part 1 — it builds one company from incorporation through funding, dilution and exit, and every number carries through.