Essential components of startup ownership records
- Issued shares by class (ordinary, preferred, growth) and by holder
- Outstanding options and their strike prices and vesting status
- The unallocated option pool available for future grants
- Convertible instruments, such as SAFEs or convertible loan notes, and their conversion terms
- Fully diluted totals that include all of the above, not just issued shares
A cap table that only shows issued shares understates dilution. Fully diluted figures, which include the whole option pool and any convertibles, give a more honest picture of what each shareholder actually owns, which is why equity administration tracks the pool separately from issued grants.
Operational frequency for cap table record maintenance
The table should be updated within days of any change: a new hire's option grant, an exercise, a share transfer, or a funding round closing. Waiting until the next round to reconcile everything increases the chance of losing track of an approval or a signed agreement, particularly once option pool grants start moving quickly.
Recording individual grants against reserved pools
Suppose a company has 1,000,000 fully diluted shares before a new grant. The board approves 20,000 options for a new engineer, drawn from the existing option pool. After the grant, fully diluted shares are still 1,000,000 in total (since the pool was already counted), but the engineer now holds 20,000 of them, or 2.0% fully diluted, and the pool's remaining unallocated shares fall by 20,000.
| Before grant | After grant |
|---|---|
| Unallocated pool: 80,000 shares (8.0%) | Unallocated pool: 60,000 shares (6.0%) |
| New hire: 0 shares | New hire: 20,000 shares (2.0%) |
| Total fully diluted: 1,000,000 | Total fully diluted: 1,000,000 |
Documentation standards for ownership history verification
- Link every row to a signed grant agreement and board approval
- Reconcile the cap table against the statutory share register regularly
- Version the table so you can see ownership at any past date, not just today
- Keep a clear note of any pending grants that are approved but not yet issued
Day to day cap table questions
- Who should own cap table management day to day?
- Usually a founder or the finance lead early on, moving to dedicated software or a company secretary function as the number of shareholders grows.
- How is a cap table different from a share register?
- A share register is the legal record of issued shares required by company law. A cap table is a broader working document that also includes options, pools and convertibles on a fully diluted basis.
General information for founders, not legal or tax advice. Thresholds and rates change, so confirm the current position with an adviser in the relevant country before granting.