Cap Table Basics & Founder Equity
Cap Table Basics refer to the fundamental structure of a capitalization table, which outlines the ownership stakes, equity shares, and securities in a company. It details who owns what percentage of the business, including founders, investors, and employees. Founder Equity specifically represents the portion of the company owned by the original creators or founders. Understanding cap tables and founder equity is essential for managing ownership, attracting investors, and making informed decisions about fundraising and dilution.
Cap Table Basics & Founder Equity
Cap Table Basics refer to the fundamental structure of a capitalization table, which outlines the ownership stakes, equity shares, and securities in a company. It details who owns what percentage of the business, including founders, investors, and employees. Founder Equity specifically represents the portion of the company owned by the original creators or founders. Understanding cap tables and founder equity is essential for managing ownership, attracting investors, and making informed decisions about fundraising and dilution.
💡 Key Takeaways
- Understand what a cap table is and what it tracks (ownership stakes, equity shares, and securities).
- Identify who owns equity among founders, investors, and employees and how ownership percentages reflect roles.
- Learn common security types (common vs. preferred stock, stock options, SAFEs, convertible notes) and their effects on ownership.
- Grasp founder equity concepts, including vesting, dilution from rounds, and the impact of an option pool.
- Learn how to read a cap table, including pre-money vs post-money and fully diluted ownership calculations.
❓ Frequently Asked Questions
What is a cap table?
A capitalization table shows a company's securities, ownership stakes, and share counts, detailing who owns what percentage across founders, investors, and employees.
Who appears on a cap table?
Founders, investors (e.g., angels, VCs), and employees with stock options or warrants, along with any other security holders.
What does founder equity mean?
Founder equity is the portion of the company owned by the founders, reflecting their initial stake and any changes from fundraising or option pools.
How does dilution affect founder equity?
Issuing new shares for investment or options reduces existing shareholders' percentage unless they participate pro rata or the company grows in value.