What Is a Cap Table? Definition, How It Works and Examples

The cap table meaning shifts with the reader. In finance, a company’s capitalization is the mix of equity (shares) and debt that funds it. The cap table writes out the equity half, holder by holder. In a startup, it is the working record of who owns what. Most startups keep it in equity-management software.

In venture capital (VC), the cap table meaning is narrower and more practical. It is the model a funding round is negotiated on. A term sheet, the short document that sets the price and main terms of a round, is priced against a fully diluted share count. That count includes every share that could exist. The new investor’s percentage is computed from it. A “pro forma” cap table then shows the company as it will look the moment the round closes.

The columns are always the same: holder, class, number of shares and percentage. The rights of each class do not appear on the cap table at all. Those rights include its liquidation preference, the amount it is paid first in a sale, along with its conversion terms and votes. They are written in the certificate of incorporation, the company’s founding charter. The cap table only counts the shares that carry them.

A simple cap table explanation is to watch one table change. Below, two founders start with 8,000,000 shares of common stock. They reserve 2,000,000 more for an employee option pool, shares set aside for future grants to staff. A seed round then raises $2M at an $8M pre-money valuation, the value of the company before the new money arrives. That sets a price of $0.80 a share and creates 2,500,000 new seed preferred shares. A Series A then raises $10.5M at a $31.5M pre-money valuation. Series A term sheets usually add a condition, and this one does. Before the round, the option pool must grow to 15% of the company as it will stand after the round.

Read the Series A column twice. The 625,000 new pool shares were added before the round, inside the $31.5M pre-money valuation. So the new pool did not dilute the Series A investors. It diluted the founders and the seed investors. This is the option pool shuffle: the round’s terms set the size of the pool, and the existing holders pay for it. As a result, a headline pre-money valuation overstates the price of the existing holders’ shares. The guide to share dilution works through the arithmetic of each round.

Issued vs Fully Diluted: Which Denominator?

Suppose 1,200,000 of the 2,625,000 pool shares have been granted as options, and the rest are unallocated. The same cap table then gives three honest answers to “what do the founders own?” Each answer divides by a different denominator, the total number of shares counted.

Rounds are priced on the fully diluted basis. It gives each holder the lowest of the three percentages, so that is the number to ask for. Issued and outstanding shares are the ones that exist today. The fully diluted count adds everything that could become a share: granted options, the unallocated pool and warrants. An honest table also adds any SAFEs (simple agreements for future equity) and convertible notes that have not yet converted.

Preferred stock is what investors buy in a priced round, where the company sets a price per share. Its usual protection is a 1× non-participating liquidation preference. In a sale, each preferred holder takes whichever is greater: its money back, or what it would receive by converting to common. Common stock is held by founders, employees and option holders. It is paid only from what is left. The charter sets the order among the preferred classes. “Standard” seniority pays the latest round first. “Pari passu” pays all series side by side.

Here is the cap table above in a sale for $15M. That is about a third of the Series A post-money valuation. Series A ranks ahead of seed, and both have a 1× non-participating preference.

At a high enough price, the stack stops mattering. Every preferred holder converts, and the proceeds follow the percentages. For how a sale is paid out in practice, see what happens to stock when a company is acquired.

When you invest through a single-deal vehicle, the vehicle holds the shares in its own name. So the vehicle is on the company’s register, and you are not. The SPV appears on the cap table as one holder of record, the name on the company’s share register. It has one line: its class and its number of shares. Behind that line sit all of the vehicle’s investors. Each owns a part of the vehicle in proportion to what they put in. For the mechanics, see what an SPV is and SPV investing.

A private company’s full cap table is usually confidential. Check what the deal documents disclose on these points:

The class

Common or a series of preferred. Shares bought from an employee are usually common, with no preference.

The rank

Where that class sits in the stack, and how much preference sits above it.

The denominator

Issued or fully diluted, and whether unconverted SAFEs and notes are counted.

The price

The price per share the vehicle paid, compared with the last round’s price.

What comes off

Your share is a fraction of the vehicle’s line. The vehicle’s fees, expenses and carry (the manager’s share of any profit) are then settled out of the proceeds.

The structure suits the company too. Under Rule 12g5-1 of the SEC, the US securities regulator, an entity counts as one holder of record. So one vehicle adds one name to the register, even if two hundred people invest through it. The exception is a holding that exists mainly to get around the registration threshold. To see where your entry price comes from, read where valuations come from.

Options on the pool line are granted at a strike price, the price an employee pays to buy each share. An independent appraisal of the common stock sets that price. See 409A valuation for why it sits below the price of the last preferred round.

A cap table summary fits in one line: who holds what class, on which denominator, with how much preference above you. Cap table analysis means checking all three before you trust a percentage. Each common mistake skips one of them:

• Quoting a percentage without its denominatorIn the example above, the bases differ by eight points.
• Reading ownership as a share of proceedsBelow the last round’s price, the stack decides. A 45% holder can receive 12%.
• Leaving out unconverted SAFEs and notesThey become shares at the next priced round.
• Missing the pool top-upWhen the pool grows inside the pre-money valuation, the existing holders pay for it.
• Assuming every share is the same shareAt the same headline valuation, common and preferred can pay out very differently.
• Treating the vehicle’s percentage as yoursThrough an SPV, you own a fraction of its line, after fees and carry.

Cap table (capitalization table)

The list of every shareholder, class, option and convertible in a company, with share counts and percentages. In a funding round, it is the model the price is negotiated on.

Fully diluted

A share count that includes everything that could become a share: issued stock, granted options, the unallocated pool, warrants and convertibles. Most rounds are priced on this basis.

Issued and outstanding

The shares that exist today, without options or convertibles that have not yet become shares.

Pre-money valuation

The value of a company just before a round’s new money comes in. The price per share is the pre-money valuation divided by the shares already counted.

Preferred stock

The class investors buy in a priced round. It carries a liquidation preference and conversion rights, as the certificate of incorporation states.

Common stock

The class founders, employees and option holders usually own. In a sale, it is paid after every preferred class.

Liquidation preference

The amount a preferred class is paid in a sale before common. It is usually 1× the investment and non-participating, so the holder takes either that amount or its as-converted share.

Option pool

Common stock reserved for grants to employees. Its size is usually reset at each round, and the reset normally happens inside the pre-money valuation.

Option pool shuffle

Growing the option pool inside the pre-money valuation, so the existing holders bear the dilution and the new investor does not.

Holder of record

The name on the company’s share register. Through an SPV, the vehicle is the holder of record and its investors stand behind it.

Rules were last checked against the primary text on October 1, 2026. The cap table examples are illustrative and describe no real company. The page cites US federal and Delaware rules, and other jurisdictions differ. For what “accredited” means in the 500-holder test, see accredited investor and the SEC’s own summary.