What is Cap Table Management?
Cap table management refers to the act of controlling and managing a company's cap table. This is done by determining what is required in order for there to be a profit and keeping that profit in a manner that allows for it to be invested in other ventures. A cap table essentially controls the amount of cash that a business has available for capital investments. It is also known by other names, such as an enterprise value, cost of capital, and retained earnings.
Known more formally as a cost of capital, a cap table essentially analyzes the equity value of a business through the use of capitalizations. This will include items such as: The percentages of ownership held by individuals or entities. Equity dilution. The value of outstanding shares at the end of any particular round of investment by investors, founders, and others.
There are several reasons why a company would want to create a cap table. First of all, it is a method of determining what is available for an investor to purchase into the business. An example is when an angel investor invests in a company based upon the potential for capital appreciation in future years. In order to determine what is available to most investors, an analyst creates a cap table. With current funding rounds, the numbers for available equity will go down if more people are buying than are selling, with selling increasing if fewer people are selling.
It must be noted that what is termed a cap table management must be contained within the documentation that forms part of a startup or going public funding round. Many investors are wary of providing startup money based on what is known as "secretive" information. To provide investors with what is referred to as a non-disclosure agreement, the company must prepare and sign confidential documents. These documents are called the S-ODAs.
The purpose of these documents is to protect the interests of the company, its investors and the employees of the business. By releasing information to the shareholder(s) about the company, as well as the assets and losses, the company is said to be in compliance with its S-ODAs. In return, the shareholders are protected from any lawsuits originating from the information that is released by the company. If the company is sued by a third party, the shareholders are shielded from liability in the event that the company does not make good on its promise to release information that may lead to lawsuits.
In order to use what is cap table management, one has to have some familiarity with Excel. Excel is one of the most commonly used programs for creating spreadsheets, including graphs and charts. One can easily create a pie chart or a bar chart with just a few clicks of the mouse. One can also easily manipulate the values in the tables or columns. These tools are available for free online, and many small and medium-sized companies do not even charge for them when they are purchased. Because many stocks are traded through major exchanges, such as Nasdaq and NYSE, it is often necessary to convert the data from one format to another, especially if the information is from an outside source and needs to be interpreted appropriately.
One of the advantages of what is cap table management is that it helps the investors to make decisions on equity issues. For example, when new information emerges regarding the economic performance of a company, or the latest sales figures for a particular stock, the shareholders must have the relevant information in order to make an informed decision. Some may want to sell all or part of their investments while others may decide to hold on to the stocks. However, by using what is cap table management, the company founders can readily communicate with the shareholders.
A company that uses what is cap table management will also benefit from the use of excel sheets. Excel is an excellent program that enables the creators to easily create what is cap tables, as well as interact with it in ways that would not be possible otherwise. In startups , Excel can be used to examine the cost per share (CPS) numbers provided by the companies and to compare similar companies that have been trading in the same market for a while. startups can be used to make intelligent decisions regarding what is needed by the company, its assets, and its liabilities.