Cap Table (Capitalization Table)
A cap table is a record of a company’s ownership, including shareholders, option pools, and security classes.
Allocator relevance: Determines dilution, control dynamics, and economic outcomes at exit—especially when preferences and pro-rata rights are involved.
Expanded Definition
Cap tables show who owns what and under what terms. Beyond percentages, the important detail is the security structure: common vs preferred, liquidation preferences, participation rights, and option pool mechanics. A “clean” cap table supports future financing; a messy one can deter investors or complicate exits.
For allocators evaluating venture exposure, cap table mechanics explain why two companies with similar headline valuations can produce very different realized outcomes.
How It Works in Practice
Investors review cap tables during diligence, before priced rounds, and during secondaries. They model dilution through future rounds and examine how liquidation preferences and seniority affect outcomes in base and downside scenarios.
Decision Authority and Governance
Control rights often map to board seats, voting provisions, and protective covenants rather than pure ownership percentage. Governance risk rises when rights are fragmented or when early investors have misaligned control levers.
Common Misconceptions
- Ownership percentage determines exit proceeds.
- SAFEs don’t materially affect dilution.
- A high valuation means a strong return.
Key Takeaways
- Terms matter as much as percentages.
- Dilution is path-dependent through rounds.
- Preferences can reshape outcomes in downside exits.