Question 1

What is a cap table?

Accepted Answer

Record of who owns what in your company. Founders, investors, option holders. Shares, percentages, valuations. Must be accurate and up-to-date.

Question 2

Can I use a spreadsheet for cap table?

Accepted Answer

Works for very early stage. Gets messy fast with options, rounds, convertibles. Migrate to proper software (Carta, Pulley) before raising or hiring significantly.

Question 3

What does cap table software cost?

Accepted Answer

Pulley: free tier for early stage. Carta: starts ~$1000/year. Others vary. Worth the investment to avoid mistakes. Gets expensive at scale.

Question 4

What is a 409A valuation?

Accepted Answer

IRS-required valuation for setting option strike price. Must be done by qualified firm. Needed before issuing options. Usually $1-5K. Valid 12 months typically.

Question 5

How do I set up an option pool?

Accepted Answer

Reserve shares for future employees. Typically 10-20% at formation, expand at funding. Dilutes founders. Board approval needed. Plan ahead.

Question 6

What's the difference between shares and options?

Accepted Answer

Shares: you own them. Options: right to buy at set price. Founders usually get shares. Employees usually get options. Different tax treatment.

Question 7

What is vesting?

Accepted Answer

Earn equity over time. Standard: 4 years with 1-year cliff. Unvested shares return to company if you leave. Protects all stakeholders.

Question 8

Should founders have vesting?

Accepted Answer

Yes, typically. Protects remaining founders if one leaves early. Investors require it. Usually 4-year vest, sometimes accelerated for founders.

Question 9

What is an 83(b) election?

Accepted Answer

IRS form to pay tax on restricted stock at grant. Must file within 30 days. Beneficial if value increases. Founders should almost always file.

Question 10

How do I issue stock options?

Accepted Answer

Board approves pool and grants. Stock option agreement with employee. 409A valuation sets price. Cap table software handles paperwork.

Question 11

What happens to options when someone leaves?

Accepted Answer

Vested options: usually 90 days to exercise post-termination. Unvested: forfeited. Check your plan. Exercise costs money and may trigger taxes.

Question 12

How do SAFEs and convertibles show on cap table?

Accepted Answer

Not on cap table until they convert. Track separately as outstanding instruments. Convert at next priced round. Show on cap table pro forma.

Question 13

What is fully diluted cap table?

Accepted Answer

Shows ownership assuming all options exercised and convertibles converted. Investors want this view. Different from current issued shares.

Question 14

How do I handle equity mistakes?

Accepted Answer

Fix early. May need board resolutions, amended documents. Get legal help for significant issues. Common to find issues during due diligence.

Question 15

What records do I need to keep?

Accepted Answer

Board resolutions, stock certificates or notices, option agreements, exercise records, 83(b) elections, 409A reports. Keep everything. Software helps.

I need to manage our cap table and equity properly

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