What is a cap table? A dead-simple explanation

A cap table — short for capitalization table — sounds like an accounting artefact. It is not. It is a list of who owns your company.

That is the whole concept. Everything else in this series is detail hanging off that one sentence.

Build one from nothing

Two people start a company. They incorporate and issue themselves shares. The company decides to issue 10,000,000 shares in total, split 60/40 because one founder is full-time from day one and the other joins three months later.

Holder	Shares	%
Founder A	6,000,000	60.00%
Founder B	4,000,000	40.00%
Total	10,000,000	100%

That is a cap table. Three columns: who, how many, what share of the whole.

Why 10,000,000 and not 100?

Because shares get divided later. You will grant an employee “0.4% of the company,” and 0.4% of 10,000,000 is a clean 40,000 shares. With 100 shares it would be 0.4 of a share, which is not a thing you can issue. The number itself is arbitrary and has no effect on value — 10 million shares of a company worth $1M is exactly as valuable as 100 shares of the same company. Only percentages mean anything.

Add a person

Three months in, an advisor joins and is granted 100,000 shares. The share count goes up, and every existing percentage goes down:

Holder	Shares	%
Founder A	6,000,000	59.41%
Founder B	4,000,000	39.60%
Advisor	100,000	0.99%
Total	10,100,000	100%

Founder A did not lose shares. She still holds exactly 6,000,000. What changed is the denominator: 6,000,000 out of 10,100,000 instead of out of 10,000,000.

This is dilution, and it is the single most important idea in equity. You are diluted when new shares are created, not when your own shares change. Your slice stays the same size; the pie gets bigger.

Why anyone cares

Four groups read your cap table, for four different reasons:

You. It answers “how much of my company do I still own,” which determines what a future exit is worth to you and, at the extreme, whether you still control the company.

Investors. Before wiring money, an investor needs to know exactly what they are buying a percentage of. An unclear cap table delays a round; a wrong one can kill it.

Employees. A grant of “40,000 options” is meaningless without the total. 40,000 out of 10,100,000 is 0.4%. Out of 101,000,000 it is 0.04%. Same number, tenfold difference.

Acquirers. In an acquisition, the cap table decides who gets paid what. It gets audited line by line, and every discrepancy becomes a negotiation or an escrow.

What actually goes on it

A real cap table tracks more than issued shares:

• Shares, by class — common for founders and employees, preferred for investors.
• Options — granted but not exercised. Not shares yet, but they will be.
• The unallocated option pool — shares set aside for future hires.
• SAFEs and convertible notes — money that becomes shares later, at terms fixed now.
• Warrants — usually from lenders, the right to buy shares at a set price.

Each of those gets its own part in this series, because each is a place where founders consistently get surprised.

The one habit worth forming today

Keep it current, and keep it somewhere you control.

A cap table drifts out of date quietly: a grant approved in a board meeting and never recorded, an advisor who left with unvested shares nobody cancelled, a SAFE in an email thread. Two years later, in diligence, someone has to reconstruct the truth from signatures, and it costs weeks of legal time.

The rule: nothing changes ownership without a document, and no document goes unrecorded. A signed board consent, a signed grant letter, a signed SAFE. If it is not written down, it did not happen — and if it is only inside a vendor’s app, you do not really have it.

Next

Part 2 covers the four numbers that trip up almost everyone reading a cap table for the first time: authorized, issued, outstanding and fully diluted — and why your ownership percentage has two different correct answers depending on which one you use.