A cap table, short for capitalization table, is a record of the company’s ownership and how its equity ownership is distributed. As a company grows, adding new investors, stock options, and convertible notes, the cap table can become extremely complex and difficult to manage. Fortunately, there are many tools available that can assist founders in managing their startup’s cap table.
What is a startup cap table?
Before we get to the list, let’s back up a bit. A startup cap table is a document containing a record of all the securities issued by the company, including the equity ownership, shareholders, and the share classes owned by investors. The cap table is used to calculate the percentage of ownership of each shareholder, which is essential for understanding the dilutive effects of raising new capital, tracking the vesting of shares and options, and determining the value of the company and, if all goes well, the distribution of the proceeds from an exit.
If you’re not familiar with startup cap tables, you can learn more about them in our article, A Beginner’s Guide to Startup Cap Tables.
Why would I use a cap table management tool?
Cap table management can be a daunting task, especially for growing startups. As your company grows, so does the complexity of your cap table. Keeping track of all the shareholders, their ownership percentages, and the different types of securities they hold can quickly become overwhelming. That’s where a cap table management tool comes in.
The goal of a good cap table management tool is to allow you to easily keep track of the ownership and equity structure of your company. The tool will provide you with real-time reporting, which is necessary for decision-making related to fundraising, equity offerings, and exit scenarios. You should be able to quickly see who owns what percentage of the company and how much each shareholder’s stake is worth.
Another benefit of using a cap table management tool is that it can help you keep your cap table organized, up-to-date, and easy to access. You won’t have to spend hours sifting through spreadsheets and legal documents to figure out who owns what. Instead, if the tool is properly set up, all the information and documentation you need will be in one place, and you can access it with just a few clicks.
A cap table management tool can also help you raise capital. When you’re looking to bring on additional investors, a clean and accurate cap table can help you quickly provide potential investors with the information they need to make an informed decision.
Overall, a cap table management tool is an essential tool for any growing startup. It can help you stay organized, make informed decisions, and ultimately, succeed in the highly competitive world of entrepreneurship.
What to consider when choosing the right cap table management tool
Cap table management software is an essential tool for any startup that wants to keep track of its ownership structure, issue stock options, stay compliant with regulations, and avoid common startup cap table mistakes. With so many options available, it can be challenging to choose the right software for your business. Here are some factors to consider:
The first thing to consider when selecting cap table management software is the functionality. The software you choose should have all the necessary features to manage your cap table effectively. This includes tracking equity ownership, managing stock options, and creating reports. In addition, the software should help you stay compliant with regulations, such as SEC filings and tax requirements. Look for software that can automate these processes, so you can focus on growing your business.
The software you choose should be easy to use, even for non-technical users. The dashboard should be intuitive and user-friendly, with clear navigation and easy-to-understand instructions. Look for software that offers training and support to help you get up to speed quickly. Ideally, the software should be cloud-based, so you can access it from anywhere with an internet connection.
Cap table management software should integrate with your existing accounting and record-keeping systems. This will help you avoid duplicate data entry and ensure that your financial records are accurate. Look for software that offers integrations with popular accounting software, such as QuickBooks and Xero. In addition, the software should be able to import data from spreadsheets and other sources, so you can get up and running quickly.
The cost of cap table management software can vary widely, depending on the features and functionality you need. Some software is priced per user, while others charge a flat fee. Look for software that fits within your budget, but don’t sacrifice functionality for price. Keep in mind that the software you choose will be an investment in the future of your business, so it’s important to choose wisely. And, some platforms will offer a free tier as a perk for the earliest-stage startups.
By considering these factors, you can choose the right cap table management software for your startup. With the right software in place, you can streamline your equity management processes, stay compliant with regulations, and focus on growing your business.
Ultimately, using a cap table management platform can have a significant positive impact on the success of your business. By taking the time to find the right solution and implementing it early on, you can set your company up for long-term success and growth.
Startup cap table management platforms
Carta is the gold standard for cap table management software, and offers startups and private companies with a comprehensive solution to track equity ownership. The software offers advanced reporting and analytics, share plan administration, and ASC 820 valuations. Carta is known for being user-friendly and offers an impressive range of features like options tracking, waterfall analysis, scenario modeling, and compliance reporting.
Capshare is a cloud-based software that helps private companies manage their cap tables and equity plans. The platform provides startups with an efficient way to track ownership, generate reports, and comply with regulatory requirements. Capshare offers features like drag-and-drop modeling, vesting schedules, document e-signatures, and 409a valuations. Capshare has great customer support and is priced competitively.
3. Gust Equity Management
Gust Equity Management software offers automated document generation, capitalization tables, payout calculations, and compliance tracking. Gust helps startups navigate the complexities of equity management with features like 409a evaluations, share dilution, and equity exits. Additionally, Gust offers an integrated investor management platform to manage investor communications and portals.
Eqvista is a cloud-based cap table management software that allows startups to track equity, manage shareholder transactions, and stay compliant. Eqvista offers features like customizable vesting schedules, waterfall analysis, and supports different share classes. Eqvista is well-regarded for its competitive pricing and user-friendly interface.
5. Shareworks by Morgan Stanley
Shareworks by Morgan Stanley is an enterprise-level equity management solution that provides cap table management, equity plan administration, and financial reporting. Shareworks offers features like real-time roll-ups, stakeholder notifications, and equity compensation modeling. While Shareworks may be more expensive than some of its counterparts, it is best suited for larger companies that require a more integrated solution.
Ledgy is a Swiss-based software company offering cap table management, employee participation programs, and document sharing. Ledgy provides users with an intuitive dashboard, custom vesting schedules, share class management, and compliance tracking. Ledgy also offers add-ons like advanced modeling and organized records. Ledgy’s pricing is reasonable, and they provide email, chat, and phone support to their users.
Seraf offers a cap table management solution that specializes in portfolio management, investor management, and document storage. Seraf’s platform assists startups in valuing their companies, reporting on multiple investment types and performing detailed portfolio analyses. Seraf also features an angel investing community complete with its data tracking capabilities and research tools.
Tracflo is a cap table management solution that simplifies cap table-tracking and shareholder
management. Tracflo offers features like ownership tracking, share certificates, compliance, and document management. They also offer add-ons like legal template libraries and certificate design software. Tracflo is perfect for startups that identify as technology or real estate companies.
Managing your company’s cap table is an important aspect of your business as it affects your equity ownership structure. Selecting the right cap table management tool is critical, and the features, user-friendliness, integrations, and pricing should inform your final decision. There are many options out there, but hopefully this article helps you along the way to making your decision!
We’ve got some free resources available to get you started with your own cap table. Founder’s CPA has a team of experts that can help you build and maintain your cap table.
Contact the startup finance experts at Founder’s CPA today to get started in picking your cap table management platform today!.