By Dave Chitester, Founder, Seedfunders Florida
In early-stage investing, there’s no shortage of visionary founders, big ideas, or enthusiastic capital. But if there’s one thing that consistently determines whether a deal moves forward—or falls apart—it’s the capitalization table.
Commonly referred to as the Cap Table, this spreadsheet tracks who owns what in a startup. And while that might sound simple, the devil is in the details.
What Is a Cap Table?
At its core, a Cap Table is a spreadsheet that lists:
- All equity holders (founders, investors, employees, advisors)
- Dates equity was issued or granted
- Number of shares/units each stakeholder holds
- Type of equity (common stock, preferred stock, options, warrants)]
- Terms like liquidity preferences and participation rights
- Rounds of funding (pre-seed, seed, Series A, etc.)
- Equity reserved for future hires
For investors like Seedfunders, the Cap Table is one of the first documents we review—and often one of the most telling.
What Does “Fully Diluted” Really Mean?
There’s no universal definition, but generally, a fully diluted Cap Table includes:
- All common stockAll preferred stock (assumed to convert to common)
- All issued options and warrants
- Any agreements that entitle someone to future equity
Founders sometimes exclude future options or convertible notes under the assumption they “don’t count yet.” But if they exist, they matter. The money from those convertible notes has likely already been spent. Omitting them from the Cap Table misrepresents the true ownership structure—and can jeopardize trust.
I’ve seen more than one deal fall apart because a company failed to include $1 million in convertible notes in their Cap Table. To an investor, that isn’t a footnote—it’s a revaluation.
Clean Cap Tables Close Deals
An accurate Cap Table tells us more than just share counts. It tells us how well a company manages complexity. It shows us if key documents are in order. It signals whether a founder understands ownership, dilution, and long-term implications.
On the flip side, messy Cap Tables kill deals.
I’ve been there myself. Early in my own startup journey, we had employees selling equity to other employees. When our VC partner came in to do due diligence, the Cap Table was a disaster—and it took days to untangle.
Even worse? Multiple versions of the Cap Table floating around from CPAs, founders, and legal teams. If we can’t trust the records, we can’t trust the deal.
Enter the Waterfall
A Cap Table isn’t just about ownership today—it determines how proceeds are distributed in a liquidity event. This is where the Waterfall Analysis comes in.
If a company exits at $10 million, the Cap Table determines who gets paid first and how much. Participating preferred shareholders may receive both their original investment and a share of the common equity. Every term and stakeholder impacts how that money flows.
Having an accurate Cap Table is essential to modeling these scenarios, calculating dilution, and planning for future funding rounds or employee grants.
Tools + Tips for Founders
If you’re still managing your Cap Table in Excel, consider moving to a dedicated platform. Tools like Carta, Astrella, and EquityEffect can automate tracking, reduce errors, and simplify modeling for future rounds.
Cap Tables are living documents. Maintain them. Audit them. Treat them like the critical assets they are.
And if you’re a founder navigating this for the first time—lean on experienced angel groups. At Seedfunders, we’ve seen hundreds of Cap Tables. We know what to look for. We know how to ask the right questions.
The Bottom Line
Cap Tables aren’t just a formality—they’re a financial map of your company’s history, present, and future.
Done right, they build investor confidence and support smart growth.
Done poorly, they can cost you everything.
Angel groups like Seedfunders exist to help founders get this right.
We’re not just writing checks—we’re building companies the right way.
Learn more at www.seedfunders.com