Efficiently Scaling Your Cap Table: A Look at Equity Management Solutions
Summary
Further, cap tables along with their terms and conditions, are a key input to any 409A valuation and carry a significant tax impact once these shares are exercised or sold. Finally, any leadership team evaluating term sheets should understand the economic impacts prior to completing any stock purchase agreement. With an accurate cap table, existing shareholders can determine how much of the company to offer an investor for a given amount of new capital, without excessively diluting their own holdings. As the company takes in new rounds of investment and as new employees join the organization, that cap table beginning as a simple spreadsheet can quickly turn into a complicated web of formulas, dates, and flows of capital. Finally, there are liquidity events such as mergers, acquisitions, or initial public offerings; in which founders and early investors cash out part or all of their ownership stake in the company.
