A startup cap table template is a basic list of the initial investors and the amount of shares they each have in the business. Usually these investors are the original founders of the business. Once a startup has been established, the original founders of the business are issued special common stock that represents how much of the business they personally own. This becomes their personal stake in the business.

All new investors are required to purchase an initial Common Stock Certificate. The certificate then represents the complete information on the business and its current condition. The startup cap table then lists the initial owners along with their current or latest addresses. There is also a column to show the complete address of all current and future investors. It also has columns for the number of shares owned by each.

Investors should be wary of a startup cap table template that doesn’t have an investment breakdown. Many people think that they will make money with little effort or they won’t need any outside capital at all. This is not true. Anyone can invest and anyone can benefit from a good startup capital structure.

Investors should also pay attention to the type of ownership structure provided. Typically, there is some kind of ownership structure in place. Often times, this is done on an equity level with common shares and preferred stocks being offered. There may also be an Issuance Date and redemption date. An investor must know what these terms mean before investing.

There are several ways to structure ownership, such as common shares or preferred stocks or a combination of both. The best way to structure the ownership is to allow new investors to equal the value of existing shareholders (common or preferred) during the startup period. At the end of this period, both owners contribute their shares or their value to the startup capital. This percentage is known as the startup capital percentage.

It is also important to include the price-per-share in a startup cap table. The price-per-share or PPS represents the price per share of stock as it is now. There are many different ways to calculate the price-per-share. A common method is to use the cost of capital and the net present value of money invested over time. This is a good method because it is based on historical prices and the future potential profit of new investments.

An important part of a startup cap table template should be the statement that identifies the pre-money sources. Pre-money sources are generally convertible debentures, preferred stocks, common shares or common stock, warrants, bank overdrafts, and mortgage notes. The best source of funds should be one that will not change during the life of your business. Also note that you can use one of several forms of financing depending on how your company grows over time. Debt is preferable to equity for short term growth; equity is preferable to debt for long term growth.

The last part of a startup cap table should provide information on the sale and distribution of ownership shares. This information should cover what happens to the founder or the original shareholder when the business becomes a multiple-owner operation. Most businesses prefer to keep the founder or original shareholder. For dual-employee operations, the person who exercises control is responsible for the distribution of shares and therefore does not need to be a founder or an employee of the business.

In most cases, an IPO is required before the distribution of shares. It also may have other requirements attached. The Startup Cap Table Template should provide blank options for future distribution of shares. If there are options, all they should show is a tick box for the number of shares that will be issued later and an expiration date. This expiration date should be large enough to allow time for a large number of shares to be purchased by someone building up the business.

One area that is frequently overlooked in startup cap tables is the effect of dilution. Dilution will affect the value of shares in a fundamental way, but the distribution of ownership may also be impacted by the type of ownership structure used. For instance, if the founders receive their shares without exercising any stock options, they will effectively give up 100 percent of the ownership right. Dividends are commonly used as an alternative in many cap tables, but in this case, the dividend should be tied back to an option that is exercisable at the end of the year. This way, the owners will still own a percentage of the company, but the stake is much smaller.

The Startup Cap Table template is designed to help potential founders maximize the value of their investment. However, there are some issues that must be addressed in order to create the best results. A complete analysis of the type of ownership structure used and the expected dividends and capital appreciation should be conducted by an independent accountant. The audit should also include an examination of the method by which the startup company obtains funds. Because all funds must come from a private funding source, this portion of the audit should be especially thorough.