What is Cap Table Management?

Cap table management is the act of setting the cap on your business's investments. Known more officially as an equity cap table, a cap table analyzes the equity value of a business through a number of different calculations. These are broken down into four sections:

The first section includes the initial purchase of shares by the founder(s). The amount of these shares that the founder receives is called the equity capital. This is a one-time cash outlay that is meant to be used to grow the company through new investment.

The second section of what is cap table management involves the use of diluting capital.  startups  is the process of paying less money out to shareholders because of the dividends paid out from the previous owners. Dividends are not paid out to original shareholders; only those shareholders that have been paid capitalization fees are entitled to receive the dividend. By paying off some of the capital, the company increases its liquidity and is able to obtain new financing.

The third section of what is cap table management deals with capitalizing a company with outstanding shares and options that are owed on the outstanding shares. These are called restricted shares and option shares. When these shares are invested in the business, it is used to increase the liquidity. It is also used as an enticement for new shareholders to buy into the business.

The fourth section of what is cap table management deals with what is known as an option exercise. This is where a shareholder may sell their shares of stock in the business to other investors. If the price does not go up, so be it that they do not exercise their options. If it goes up, then they may choose to exercise their options and purchase more shares of stock from the company. This means more liquidity for the company because more investors now want to buy into the business.

The fifth part of what is cap table management deals with how the company tracks its share ownership percentage. It does this by having shareholders contribute to the funding of the company through what is called a venture capital fund. It is the duty of the company to invest this in ventures and projects. In return for this, they are entitled to a percentage of the profits from these ventures and projects. The investors will need to pay a certain amount of capital on their behalf in order to receive this benefit.

The sixth section of what is cap tables deals with how the company uses a method known as the option treadmill. This is where investors sell options to the company for shares in the business. The founders make a certain number of calls to purchase these options. When the option is purchased, the founder is then invested in the company.  startups  is how they are able to increase their investment with a relatively small cost.

The seventh and last section of what is cap table management deals with how the company utilizes what is called a discount window. This is where investors are able to buy stocks at a discount. This is used by the founders and the earliest investors as an attempt to get the best deal possible. The discount window can be open for several different rounds. The discount window allows investors to purchase stock at prices higher than what they could purchase them at during normal trading hours.

The last two topics that are dealt with when someone is looking into what is cap table management are what is a central repository and what is a lease with a capital lease. The central repository is where all the records are kept. It is where all stock certificates and stock options are kept. It is also used as a reference point for making sure everything is accurate. The central repository is what keeps track of the opening, sales, and closing of all the businesses in the company. All of these records are legally binding.

The last topic is what is a lease with a capital lease. This is a type of loan that allows people to own part of a private company. The person who owns the shares gets the right to use the office space and other assets of the private company. This type of loan must be paid back in one period of time or else it becomes a debt. The main advantage to a lease with a capital lease is that it allows the owner to access the money, but does not require the owner to pay the amount until a certain point in the future.

What is cap table management is something that is extremely helpful for the investor that has a large stake of shares or convertible notes in a company. It is also very beneficial to the private company that uses this method for managing their capitalization table. There are many different types of capitalization tables that can be used in the private sector. These tables include cash flow statements, balance sheets, profit and loss statements, as well as other types of financial documentation.