Question
A Cap Table, or Capitalization Table, is a spreadsheet used by startups to manage and track who owns what in a company. It provides a detailed record of the company's total capitalization and the individual holdings of its shareholders. Unlike other business frameworks, a Cap Table directly influences the valuation of a company as it shows the equity distribution among the stakeholders. It's a critical tool during funding rounds as it helps determine the price per share and the percentage of the company an investor would get for their investment. Other business frameworks may focus on operational, strategic, or financial aspects, but the Cap Table is unique in its focus on ownership and equity distribution.
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Now that we wrapped the Pre-seed round, let's talk about the next stage – the Seed round. In a Seed round there is typically a prototype that has been built and something to show potential investors. At this stage, the investors are typically friends and family members and they have no clue what the price of each Common share of the company should be worth – is a Common share worth $1, $2, $3? That is, it is unclear in the early days of Airbnb if the entire company was worth $3 million, $6 million, or $9 million. What percentage of the company would an investor that invests $10,000 get? Meaning, what is the valuation of Airbnb?
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