What Is a Cap Table and How to Build One

A capitalization table, or cap table, is the document that lists who owns what in your startup. Every share, every option, every convertible instrument. It is the single most-requested document during investor due diligence and the source of every disagreement between cofounders, employees and investors when ownership becomes ambiguous.

This guide explains what a cap table actually contains, how dilution works through each round, and how to keep yours clean from the first share issuance.

What a cap table contains

At minimum, a cap table lists every shareholder, the number of shares they hold, the class of shares (common, preferred series A, preferred series B, etc.), the price paid per share, the date of issuance and the resulting fully diluted ownership percentage.

"Fully diluted" means counting every share that exists today plus every share that would exist if all options, warrants, SAFEs and convertible notes were converted. This is the number investors care about, because it is the real picture of how the cap table will look after the next round.

A simple worked example

Two founders incorporate the company and issue 1,000,000 common shares each. That is 2,000,000 shares total.

They create a 10% ESOP, which means reserving enough shares so that, after issuance, 10% of the company is in the option pool. The math: 2,000,000 / 0.9 = 2,222,222 total shares, so the ESOP is 222,222 shares.

They raise a 500K€ SAFE at a 4M€ valuation cap. Then they raise a 2M€ priced seed round at 8M€ pre-money (10M€ post-money).

At the priced round, the SAFE converts. Because the valuation cap (4M€) is lower than the round price (8M€ pre-money), the SAFE converts at the cap, giving the SAFE investor 500K€ / 4M€ = 12.5% of the post-money fully diluted equity. The new seed investor takes 2M€ / 10M€ = 20%. Each founder is diluted from 45% to roughly 30%.

How dilution stacks across rounds

Each priced round dilutes existing shareholders by the new round's percentage. A 20% seed, then a 20% Series A, then a 15% Series B, leaves a founder with: 100% × 0.8 × 0.8 × 0.85 = 54.4% of their starting equity. Add ESOP top-ups and follow-on investors, and most founders end up with 15-30% of the company at exit.

The most common cap table mistakes

Vesting missing on founder shares. Investors will require a 4-year vest with 1-year cliff during DD. Setting it up after a cofounder dispute is painful and sometimes impossible.
Verbal promises to advisors or early employees. If someone was promised "1% of the company," that needs to live in the cap table as an option grant with a strike price and vesting schedule.
SAFEs with conflicting caps and discounts. Each SAFE should follow the same template. Mixing post-money and pre-money SAFEs creates conversion nightmares.
Untracked share transfers. A founder leaving and selling shares back to the company creates legal and tax events that must be recorded.
ESOP not refreshed before a round. Investors will require enough ESOP for the next 18-24 months of hiring. If it isn't there, it gets created from the founders' equity pre-money.

How to keep your cap table clean

Use a single source of truth. A dedicated cap table tool (Carta, Capdesk, Ledgy) is worth the cost from the moment you raise a SAFE.
Update it the day any equity event happens. Issuances, option grants, SAFE signings, all logged within 24 hours.
Save signed PDFs of every document. Subscription agreements, SAFEs, option grants, board approvals.
Reconcile it before each round. Match the cap table against the company register and the signed documents.
Share a pro-forma cap table with the term sheet. Show exactly how the new round changes ownership, including ESOP top-ups.

When to involve a lawyer

At incorporation, for the founder agreement and ESOP setup. At any SAFE or convertible note issuance. At every priced round. Cap tables built on templates without legal review almost always need cleanup before a Series A, which costs more time and money than doing it right the first time.

How Verabro helps

A clean cap table tells investors you run a serious company. Verabro's investor database and CRM help you reach the right investors with a credible setup. For deeper definitions of the terms above, see the fundraising glossary.

Getting ready to raise? Start with Verabro.