Are you planning to raise funds, issue shares, or grant founder stock options (BSPCE)? You absolutely must have an up-to-date capitalization table!

A vital tool for allocating and managing ownership, the capitalization table—or “cap table”—is constantly evolving. While maintaining it is relatively straightforward when dividing capital among co-founders, it becomes more complex as the company grows and new shareholders join.

However, maintaining the capitalization table is essential. Investors place great importance on it during fundraising rounds. An outdated or inaccurate capital table can act as a deterrent and scare away financial partners. Furthermore, the capital table plays a crucial role in the internal management of your corporation and in strategic decision-making.

What is a capitalization table?

The cap table, also known as the “capitalization table,” is a summary of how the company’s capital is distributed among its various shareholders. It thus provides a snapshot at a given point in time of the company’s shareholder base and capital structure.

The capitalization table is not static. It evolves in tandem with funding rounds (or “capitalization rounds”) as well as other transactions. For example, the departure of an employee holding BSPCE options can impact the share pool and, consequently, the distribution of the company’s capital. In practice, the impact depends on the plan’s rules (departure conditions, vesting schedule, good leaver/bad leaver clauses, and treatment of unexercised shares or options).

In the context of a fundraising round, the capitalization table is generally requested by potential investors. It is a key element of the due diligence process and allows investors to gain a comprehensive view of the company’s current share capital structure and to assess the impact of their investment on it.

What does the cap table contain?

In practice, the cap table contains the following information:

• The various security holders: executives, employees, investors, etc.;
• The type of securities held by each holder: common stock, preferred stock, bonus shares, financial instruments (stock option warrants, stock subscription warrants, etc.);
• The amount invested in the company’s capital;
• The number of securities held by each holder and the percentage of the capital that this represents.

In addition, the table can present the breakdown of the capital in two ways:

• “Fully diluted” share capital: the table shows the company’s share capital andall financial instruments granting access to the capital, after their conversion into shares. This view helps estimate potential dilution.
• Share capital on a “non-fully diluted” basis: the table shows only the share capital at a given point in time, before the securities have been exercised (converted into shares).

Why is it important to maintain a capitalization table?

Your capitalization table must be updated regularly. It is an important management tool for a startup and a valuable source of information for potential investors.

1. To track every increase and decrease in capital

The cap table allows the company to track all these transactions and monitor changes in its capital structure ( capital increases, capital reductions, etc.).

An up-to-date table is essential for effectively managing the company’s legal and financial affairs. This provides your teams with a complete history of the company’s financial assets and all the latest information they need to work under the best possible conditions.

Furthermore, the capital table significantly influences the company’s decision-making process. It provides executives with a comprehensive overview of the capital structure and enables them to run simulations to assess the impact of planned transactions (fundraising, employee stock ownership plans, etc.) on that structure and anticipate the risk of dilution.

2. To Attract Investors

The cap table is essential for raising capital. An innovative project, a compelling business plan, and a strong pitch deck are not enough: investors pay close attention to the company’s capitalization table.

And for good reason: this document is a key indicator of how the company is managed. A capital table that is outdated, inaccurate, or reflects an unequal or unbalanced ownership structure can deter business angels from investing.

For example, investors are reluctant to invest in the following situations:

• • Dead equity: a founding partner holding a significant stake is no longer involved in the company;
  • Too many shareholders;
  • No stock option plan to motivate and retain employees;
  • Excessive dilution of the founders’ stake: the founders collectively hold less than 50% of the company’s equity;

The capitalization table must therefore be carefully considered and structured to attract investment opportunities.

3. To enhance the company’s credibility

As noted earlier, the capitalization table is a key indicator of how the company is organized and managed. A balanced, rigorously maintained, and regularly updated cap table demonstrates the company’s professionalism to third parties (investors, banks, etc.).

It helpsboost the company’s overall credibility and build a relationship of trust with financial partners.

As you can see, updating the capitalization table is a relatively time-consuming and even complex task. However, maintaining it is absolutely essential, both for the company’s internal management and for securing financing and managing relationships with financial partners.

Conclusion

An up-to-date capitalization table is a management tool: it clarifies the ownership structure, supports your decision-making, and facilitates communication with investors.

With Equify, you can quickly and simultaneously update your capitalization table and your securities transaction register, and access the history of all your transactions, regardless of the date.

Sources

1. Cap Table (Definition & Content — Educational Resource)
   
   
2. Mandatory Registers / Share Transfer Register (SASU) — Service-Public (Entreprendre)