When It’s Time to Move Beyond the Spreadsheet for Cap Table Management
As a start-up, one of the most important tools in your fundraising arsenal is your cap table (or capitalization table): the living, breathing document that defines your company's ownership structure, including shareholders, ownership percentages, and all the stocks or securities each owns.
Cap tables are important for founders and investors alike. Founders and startup teams use a cap table to help share their startup story during funding rounds. Investors use a cap table to assess where a company is headed and decide if an investment is in the cards. Despite the importance of a cap table, many early-stage startups still rely on spreadsheets for their cap table creation and management.
Start with a spreadsheet, but know when to move on
We get it; spreadsheets are familiar, flexible, and free. That’s why we’ve created a free cap table template to help founders get started on the right foot. It can be a great way to begin organizing your equity structure, especially in the early days when things can be relatively simple.
Download our free cap table template
But here’s the thing: spreadsheets only take you so far
As your startup grows, so does the complexity of your cap table. Spreadsheets can be error-prone and inefficient, thanks to manual data entry. Additionally, handmade cap table spreadsheets or documents require constant upkeep, updating, organization, and management, a laborious and time-consuming task that can also easily become riddled with errors - and increases in complexity with scale.
Startups using traditional spreadsheets for cap table management might also run into security and accessibility issues. Handmade spreadsheets are not the safest or most secure form to document financial information and providing access to varied stakeholders can create problems with limited permissions.
There’s also the issue of version control inconsistency. How exactly can your startup manage (and share) the most accurate, updated cap table with multiple investors, when there may be multiple versions, with varying permissions?
How Poor Cap Table Management Impacts Fundraising and Investor Trust
Beyond the internal issues a spreadsheet cap table can create for your startup, poor cap table management can also negatively impact investor trust and fundraising potential. The cap table plays a critical role in attracting new investors and keeping current stakeholders updated and satisfied with current progress, goals, and financials. Relying on a manual spreadsheet for your cap table can impact:
- Perceptions of professionalism
- Due diligence efficiency
- Trust and transparency
Perceptions of professionalism
If you’re using a spreadsheet to keep track of vital company information like ownership percentages and stock options, the outside perception of the professionalism of your startup might just take a nose-dive. Cap table spreadsheets are often sprawling documents and can easily become inaccurate, outdated, or downright messy. Early investors want to see well-organized financials and a well-organized team and company structure. A spreadsheet cap table is anything but.
Instead of using a typical spreadsheet for your cap table, a more streamlined, professional solution is cap table management software that offers a clean structure, heightened security, and automatic updates. Your cap table signals a lot to investors. Make sure your cap table says your startup is professional and takes equity management seriously.
Due Diligence Efficiency
Cap tables are a critical component of the due diligence process, during which potential investors assess and examine your history, finances, and risks and ultimately decide whether to invest.
With a cap table spreadsheet or document, the risk for delays in due diligence, thanks to inaccessibility or faulty permission controls, inaccuracies in data or updates, or scrambles to find, add, or create various documents can be high. For investors, this means more time spent on low-end tasks (emailing to ask for the updated version of your cap table, for example) and less time examining the true value of your startup and offerings.
Don’t make this mistake. An organized, automatically updated cap table that can be easily shared, assessed, and combed through can save your startup significant time during due diligence and offer potential investors a more efficient, speedy process on their end. That’s a win-win for everyone.
Trust and Transparency
Investors want real-time ownership data when assessing your startup’s cap table.
This means your cap table needs updated, accurate, easily accessible, and organized information on:
- Shareholders: names, organizations, roles, number of shares, and ownership percentage
- Types of equity: the types of equity and terms offered to each stakeholder
- Share classes: the different types of stock with specific rights, such as voting power or dividend access
- Transaction history: including funding rounds, stock options, and secondary transactions
While this information may be easy enough to keep track of in the very early days of a startup, with growth and scale, manually entering, updating, and managing all this information becomes increasingly complex -- and prone to error.
Rather than risk alienating investors with a messy spreadsheet, a software-based solution can centralize and automate your cap table management. For startups, this means reduced concerns about discrepancies, consistently updated and real-time data, and ultimately an increased level of trust from investors.
The Smarter Way to Approach Your Cap Table: Why Startups May Need More than Spreadsheets
A manually created and managed cap table spreadsheet brings along a laundry list of potential problems: mistakes during data entry, difficulty (and long hours) spent on management, a lack of security, a lack of accessibility, the dip in perceived professionalism by potential investors, the risk of forgetting to update or even updating the wrong spreadsheet…the list goes on and on.
In today’s landscape, startups need their cap table to work for them, not against them. Adopting a software cap table management system can be the best way to ensure your cap table’s accuracy, investor-readiness, and accessibility, without sacrificing security.
A good cap table software management system offers accuracy without the headache, since calculations are automated and errors (mistakes that are human-made, formula breakdowns, etc.) are highlighted immediately. This means your cap table is investor-ready from the start, and there’s no last-minute cleanup of documents when there’s potential investor interest.
A cap table software management tool can also deliver security, scalability, and collaboration. With access to controls, version tracking, and data integrity measures in place, cap table management software allows your cap table to grow alongside your startup, with accuracy, accessibility, and transparency.
Fidelity Private Shares - Cap Table Management Solution
Fidelity is committed to helping founders get transaction-ready with our cap table and data room platform, Fidelity Private Shares.
The Fidelity Private Shares platform brings cap table management and data room organization into one place, so your equity records are always up to date and backed by the right documentation. That means less time spent on manual updates and more time focused on building your company.
With a more streamlined approach, startups can:
- Automate Accuracy & Compliance
- Plan for future rounds and model scenarios
- Collaborate securely with stakeholders
- Scale their equity operations as the company grows
If you’re ready to move beyond spreadsheets or just want to see what a more streamlined approach looks like, schedule a demo today.
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