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Your Cap Table Is the Foundation of Every Deal You'll Ever Do
A cap table is a record of who owns what in your company. It tracks shares, stock options, warrants, SAFEs, convertible notes, and every other ownership stake. As simple as that sounds, it's one of the most commonly mismanaged documents in startups.
We've reviewed hundreds of cap tables. Almost every company-maintained one has been inaccurate. And the cost of fixing those errors is always higher than the cost of getting it right from the start.
What Goes Wrong
The pattern is predictable. A founder tracks equity in a Google Sheet. They promise shares over text or email. They make handshake deals with early team members. Then a term sheet shows up, and the investor's counsel asks for a capitalization opinion.
That's when things fall apart.
A capitalization opinion requires your lawyer to confirm that the cap table is accurate and ties to executed documents. If your records are a mess, that opinion can't be given. The deal slows down. Legal fees spike. And in the worst cases, the investor walks.
What a Cap Table Actually Tracks
A proper cap table includes:
- Shares outstanding for each stockholder (founders, investors, employees)
- Stock option grants with exercise prices, vesting schedules, and grant dates
- Convertible instruments like SAFEs and convertible notes, with their conversion terms
- Warrants and any other ownership rights
- The option pool, including authorized but unissued shares
Every entry must tie to a signed legal document. No exceptions. If there's no signed stock purchase agreement, restricted stock agreement, or option grant notice, the entry shouldn't be on the cap table.
Why You Need a Platform
Cap table platforms like Carta and Pulley exist for a reason. They keep records accurate, generate investor reports, manage equity compensation, and facilitate 409A valuations.
Both offer free or low-cost tiers for early-stage companies. There is no good reason to manage your cap table in a spreadsheet.
At Fellow, we commonly use Carta. It's visually clean, widely adopted, and integrates well with the workflows we use for equity administration. Pulley is another strong option with competitive pricing.
Whichever platform you choose, the most important rule is this: do not edit the cap table yourself. Let your counsel handle every entry. Every grant, every exercise, every termination, every new investor. This ensures that the cap table always matches the underlying legal documents.
Responsibilities: Who Does What
What the founder should do:
- Provide grant details (names, share amounts, vesting schedules) at least one week before board meetings
- Notify counsel within 48 hours of any termination or option exercise
- Review the full cap table at least quarterly or before every board meeting
- Never accept or sign a security on the platform if anything looks incorrect
- Consult counsel before promising equity to anyone
What Fellow handles:
- All cap table edits, consistent with executed documents
- Drafting grant resolutions and equity agreements
- Processing terminations and exercises
- Advising on 409A timing
- Issuing securities through the platform
- Fixing errors immediately when identified
Why This Matters for Fundraising
In a financing round, investors require outside counsel to deliver a legal opinion that includes representations about your company's capitalization. If Fellow has maintained the cap table from the outset, we can provide this opinion quickly and at reasonable cost.
If we haven't, full cap table diligence is required. That means reviewing every document, reconciling every discrepancy, and rebuilding the history from scratch. It costs significantly more and can delay closing by weeks.
The Bottom Line
Your cap table is not a nice-to-have. It's the legal record of who owns your company. Every investor, acquirer, and auditor will look at it.
Set up a cap table platform before you issue any equity. Let your lawyer handle every edit. Review it regularly. And never accept an entry that doesn't match a signed agreement.
If your cap table currently lives in a spreadsheet, reach out. We'll help you migrate it to a proper platform and get it audit-ready.
