In its most simple form, the capitalization table is a simple list of who has put what into the company and the corresponding ownership percentage.
For example, in advance of a Series A funding round, founders may own 100 percent of the company. If the pre-funding valuation is $1,000,000, then two founders may have an equal ownership stake of 50 percent each.
A funding round may bring more money into the company. But it also brings in more equity partners, who each now own part of the business. The total raised may bring the valuation up by an amount equal to that influx of capital. In the process, the business may be worth more on paper — but the original founders own a smaller slice than they did at inception.
If two investors contribute $500,000 each, the new money brings the company’s total valuation to $2,000,000. The original founders now own 50 percent, or 25 percent each. The new investors also each own 25 percent of the company with the $2,000,000 valuation.
The capitalization table shows this shift. One section called “Company Valuation” will show the pre-funding valuation and post-money valuation. The following section is a detailed list of each of the investors, their respective capital contributions, the amount of preferred or common shares each owns, and the percent ownership.