You have launched your new startup, and the next best thing you would want to check out is to attract investors. Well, in that case, it is extremely important to create a cap table for your business. The Cap Table or capitalisation table assumes a lot of importance in helping you organise the ownership of the company and gives an insight into each of the transaction of the company.
To make it clear, it isn’t an Excel sheet with the details of the shares held by each of the investors. In essence, it consists of several documents of legal nature and other transactions.
What is a Cap Table made of?
A cap table can consist of several factors and transactions. Some of the basic elements you would find in a Cap Table can be summed up as
- Conversions of debt to equity
- Stock issuances
- Exercises of options
If you are using a spreadsheet alone to create your cap table, it may not work in an effective manner.
What makes Cap Table Management for Startups so Essential?
With the complex factors to be taken care of, cap table management can assume larger proportions. To offer a clear understanding, a cap table management can efficiently and effectively handle the complexities involved in the cap table.
Why would you need cap table management? Well, just because it offers you plenty of options and enhancements. Here are a few advantages that a cap table management offer you.
Raise money more effectively
A properly managed cap table can be helpful in letting you raise money real quick. In fact, it would also ensure that you can raise money on better terms and conditions. If you are able to keep your cap table well managed, you would be able to negotiate the money on better terms.
Investors would indeed want to have a look at your cap table when they are considering negotiations with you about a possible investment in your startup. If you do not have a cap table or have one that is quite badly maintained, that can be one of the sole reasons to dissuade your investors and make them turn down the proposal.
Possibility of Hiring better employees
A better equity compensation can ensure that you can have access to better and quality employees. People in the executive positions would want to know the exit values they have with the compensation package they get.
A proper cap table management with that information can go much handy in helping you provide this information to the prospective employees. In fact, many companies these days show off their cap table to the employees. Employing best cap table management can indeed go quite handy in this context.
Compliance with the Regulations
This is yet another advantage you stand to gain with a properly managed cap table. A cap table on a spreadsheet can prove to be difficult and quite complex to figure out the right tax forms and regulations that you need to comply with. A well organised cap table can assist you enough in meeting the regulations and tax compliance requirements.
Using the best cap table management software can help you handle those requirements easily. These cap table management tools can come in much handy. They would be helpful enough in guiding you with respect to the updates. These tools can also come quite handy in letting you fill out the requisite forms.
Selling your Startup
When you are about to sell your company, the cap Table management can assume a lot of importance. No matter whether you are trying to go public or sell your company, a properly organised cap table can be quite a trustworthy option. You will be ending all the disputes right in the beginning.
Yes, the cap table will provide complete information on who will get what when the company goes public or selling it. A spreadsheet based cap table and the scattered documents can make the task really difficult. If you really want to track the investments and build the confidence of your investors, relying upon the right cap table management software should be the best option you would want to go with.
A few Good Cap Table Management Software options
Though we are not focussed on listing out the top end cap table management software options for the sake of this post, we will check out a few capable software options you can check out.
Say bye-bye to all the cap table management tasks using paper and rely upon the best cap table management software. It has been trusted and used by more than 10000 lawyers and investors.
Want to focus on the company incorporation, share management and other valuation services, the Eqvista should be the excellent option you would want to go with. The tool lets you work with many more options than just Cap table management.
This is yet another capable cap table management tool. It assists you in cap table management for startups as it can work wonderfully right from the initial stages of setting up the company to managing all legal aspects.
A complete solution for everything related to a company investment, Truequity can be a great choice for company ownership management at its best. You can study the stocks right from the inception stages to the exit if any. You can be assured of an accurate and up to date information into the ownership.
Well, Cap Table management is one of the most essential elements in any startup or a regular company that is open to the investors. While the concept of a cap table and its proper management would be quite essential for a wide range of business requirements. It would also be important to notice that opting for the right cap table management software will also be essential enough in more ways than one.
Check out a few select options we have shared here and get the best out of your cap table management.