A capitalization table (cap table) is a record of a company’s ownership structure accompanied by the information of the relevant stakeholders. In recent times, companies will often have multiple types of securities from common stock and preferred shares to convertible notes, warrants and options, each with its own unique vesting periods and owned by a multitude of different shareholders. Managing these ever-changing equity structures and various securities as companies go through fundraising rounds can be tedious and time-consuming on manual spreadsheets.
An argument can be made that with the tools available online, modern startups should always digitalize their cap table to optimize data visibility and validity and to efficiently facilitate fundraising and growth.
By using a digital cap table, startups can ensure their shareholding structure is always up-to-date and accessible to the shareholders. Stakeholder dashboards give founders, investors and other relevant parties visibility on their equity holdings and thus make it more tangible and easier to track growth and equity performance. More importantly, by digitalizing cap table, startups also avoid producing multiple versions of the cap table with discrepancies. This assist startups to streamline decision making as well as manage investor relations.
Eliminate Human Errors and Time Inefficiencies:
Using spread sheets to manage cap tables can be complicated and time consuming and cause a drain on limited finance human resources within startups. Minor errors can lead to misinformation that results in costly delays to strategic decision-making particularly during fundraising cycles. These inefficiencies slow down the growth of a startup
As startups grow, equity structures change and managing these changes on spreadsheets may create backlogs of inconsistency as well as a lack of understanding on the structural changes over time. Digital cap tables allow startups to view historical cap tables by date or by funding round to see a snapshot of the shareholding structure at any given time of the startups history. Similarly, startups can also utilize the forecasting functionalities to assess various fundraising scenarios as they accelerate their growth.
Managing Various Financial Instruments:
More and more startups leverage financial instruments such as convertible cotes & warrants to raise funds required for their growth. As these instruments have different maturity dates and conditions, taking them into account on a cap table can be difficult. Digital cap tables allow startups to view their diluted cap table, taking into consideration all active financial instruments and therefore giving a more comprehensive and useful snapshot of a company’s future shareholding.
All the above reasons clearly endorse startups to utilize digital cap table to address pain points and enhance growth efficiency. WOWS Global is therefore currently offering its digital cap table tool free of charge with up to 10 users to all interested startups.
Register here to start building your cap table today!