A cap table manages the equity between the founding partners of a company. In simple terms, it gives you an idea of who owns what. Managing this cap table effectively is an important task to put in place from a young startup s very early stages, yet many founders often neglect it. This article is designed to shed some light on why a cap table should be one of your early investing strategies.

So how does a cap table management help you with your capitalization problems? At its core, it allows you to more effectively manage the equity between the various stakeholders of your company. The goal is to provide the company with a more accurate picture of the current value of its equity because that allows you to better determine the viability of your business plan. Here are three ways a cap table management system can help you do just that.

First, during a funding round (where your company is seeking funding), you will present your business case to the funding panel with the hope that they will be able to provide additional funds to help you meet your projected exit costs. Your cap table will contain the current value of the equity between the founders of the company as well as the estimated exit value after a funding round. Because these are sensitive factors, you will want to have the assurance that your valuation includes the full spectrum of expected outcomes. It is also important to have the funding round in mind when discussing the potential size of your equity.

Second, many investors work with institutional shareholders because they have significant, long-term stability. These long-term investors have the power to keep companies in business for years, which provides a significant amount of stability in terms of the level of ownership. Because they have long-term investments in your company, they can also write-off the cost of capital during a funding round against dividends paid to them, which reduces the taxable income of your business. Many small businesses are therefore very hesitant to solicit capital from these investors, due to their lack of equity.

The third way that a cap table can benefit your business is through the use of the equity options pool. Equity options pools allow you to attract top capital without paying the costs associated with private placements. Because you do not need to raise venture capital during a funding round, you do not need to compensate for the cost of placing an investment into your business. This can significantly reduce the overall cost of capital for you. In some ways, the option pool allows you to have more capital available to you than you could possibly get from other sources.

When you are working with a startup capitalization table, there are several things to consider. Because you are not seeking venture capital, you will not need to disclose very much information to the potential investors. However, if you have equity in your business, you may be asked about your personal finances and what you are looking to get out of the business. Your advisors may recommend that you seek startup capital for this purpose, but it is up to you to decide whether or not you want to risk your personal savings for the sake of your business. You should only do this as a last resort if you feel your capital needs are better served by another route.

Cap table services are not for startups that intend to use their retained profits to fund their business during later stages. These services are typically only offered to startups working with early-stage founders who have limited knowledge and experience in business. The startup founders are typically seeking to use their retained funds to fund development efforts. This type of funding is often used by companies that have very little revenue and very few employees. The startup founders’ reason for seeking startup capital is typically to secure the future of the company rather than making a profit right away.

If you own a business that is currently seeking funding, you should ask your CPA what type of cap table would best serve your interests. Some entrepreneurs prefer equity management platforms such as 411, while others prefer non-equity management platforms like AngelList or WeWork Capital. However, nearly all businesses that use startup capital for acquisition opportunities prefer to work with non-equity funding sources. In addition to being more cost effective, these non-equity funding sources also tend to provide a larger number of resources for a small business owner to draw on when needed.