Tally Your Investors in a Capitalization Table
From the moment you take on your first investor in a new venture company, you need to be very careful to account for the money that investors have given you and the company shares that they own.
The standard way to do this is with a capitalization table. This table is just a list of who owns what. In its simplest form, a capitalization table is a spreadsheet that includes the investment, shares, and percent ownership for each individual — including founders — invested in your company. As you take on more investors and undergo more rounds of funding, your capitalization table will get much more complicated.
The capitalization table, or cap table for short, has to be regularly updated with information as things change. When you hire a new key employee, you will probably give him or her some stock and add that to the cap table. When you raise another round of capital, you will update the company’s valuation and add all the new investors to the cap table.
Downloadable cap table templates are available online. Venture Hacks has a good one that you can download for a $9 donation; alternatively, you can watch the site’s how-to video for free.