A cap table is a living document. Every security you issue — every option grant, every SAFE, every priced share — changes the ownership structure of your company.
Running it correctly means knowing the answer to three questions at any moment: How much of the company do I own? How much runway do I have before the next raise dilutes that further? And what does ownership look like on a fully diluted basis — including everything that hasn't converted yet?
Most founders get this wrong because they learn it reactively — during a term sheet negotiation or a due diligence process — rather than building the habit from day one. By then, the math is already messy.
How to Run a Cap Table: The Core Structure
Every cap table, whether it's a $10 spreadsheet template or a $3,000/year Carta subscription, needs the same six columns to be functional:
| Column | What It Tracks | Why It Matters |
|---|---|---|
| Stakeholder name | Founder, investor, employee, advisor | Every security needs an owner of record |
| Security type | Common, preferred, option, SAFE, warrant | Different securities have different rights and liquidation priority |
| Shares / amount | Number of shares or notional SAFE amount | The raw input for all ownership calculations |
| Fully diluted shares | Shares + all conversion equivalents | What VCs use to price a round |
| Ownership % | Holder's shares ÷ total fully diluted | The number founders actually care about |
| Vesting schedule | Cliff, monthly cadence, and end date | Unvested shares affect true ownership |
The Three Most Common Cap Table Mistakes Founders Make
I've reviewed hundreds of cap tables across 65+ investments. The same errors appear at nearly every pre-seed company.
Spreadsheet vs. Cap Table Software: When to Switch
A spreadsheet is fine at pre-seed. Once you close a priced round, you need software. The conversion math on SAFEs with different caps, MFN provisions, and post-money SAFE mechanics exceeds what most founders can model in Excel without errors.
Use a spreadsheet when:
- →You have 2–3 founders and no outside investors
- →You've raised only SAFEs at one or two caps
- →Your round hasn't closed yet
- →You have fewer than 10 total security holders
Switch to Carta or Pulley when:
- →You close your first priced round
- →You have multiple SAFE caps or conversion triggers
- →You're issuing options to employees
- →You need 409A valuations for option grants
Carta starts at around $2,400/year for early-stage companies. Pulley is cheaper for pre-Series A startups at around $500–$1,200/year. See the full comparison of cap table tools here.
How to Model Dilution Through Funding Rounds
Understanding dilution is the core skill of running a cap table. Here's how to think through a typical Seed round:
Example: $3M Seed at $12M post-money
Pre-round cap table
Founders: 8M shares (80%). Option pool: 2M shares (20%). Total: 10M shares fully diluted.
Option pool top-up (pre-money)
VCs want 10% post-round option pool. You expand pool to 2.5M before pricing. Founders diluted from 80% to 76.9%.
New shares issued to investors
At $12M post-money, investor buys 25% = 3.75M new shares at ~$0.80/share. Total shares: 16.25M.
Post-round ownership
Founders: 8M ÷ 16.25M = 49.2%. Option pool (issued + reserved): 2.5M ÷ 16.25M = 15.4%. Investors: 3.75M ÷ 16.25M = 23.1%. Prior SAFEs: convert at caps; ~10%.
Track your funding benchmarks and dilution norms by stage on the Value Add VC Benchmarking Dashboard to see how your round compares to the market.
When to Clean Up a Messy Cap Table
The best time to clean up a cap table is before you raise. Common issues that become expensive if left unresolved:
- ⚠Former co-founder shares with no vesting or repurchase rights — creates negotiating leverage at due diligence
- ⚠Advisor equity issued on verbal agreements without signed grant documents — can delay a 83(b) election and create tax exposure
- ⚠SAFEs with no pro-rata rights or MFN that haven't been reconciled against each other
- ⚠Option grants where the strike price predates a 409A valuation — creates IRS audit risk under Section 409A
- ⚠Shares in deceased or unreachable holders' names with no estate transfer documented
Budget $5,000–$15,000 in legal fees for a proper cap table cleanup. It's far cheaper than paying for it in delayed closing timelines at Series A.
The cap table is the financial history of your company.
Every mistake you make — wrong share count, unconverted instruments, informal agreements — compounds through every future round until it blows up at due diligence.
Run it on a spreadsheet if you must. Migrate to software as soon as you close your first priced round. Model every round on fully diluted shares. And never let a verbal equity agreement sit undocumented for longer than 30 days.
See how your equity structure compares to market norms with the Value Add VC Benchmarking Dashboard. For SPV-specific cap table considerations, see the SPV Dashboard. Originally published in the Trace Cohen newsletter.