Many businesses create their first ever cap table in Excel. But for any startup, you will soon need to move on to a software platform. Using cap table software, will provide you with efficacy, transparency, and protection from simple errors — all improvements that will help you and your investors feel secure.

At eShares, we see over 250 cap tables a month. Almost everyone has a least one mistake. The best way to have a healthy cap table is to collect the correct data from the very start. This will make the essential step of transitioning to software much easier, when the time comes.

Below are four important pieces of equity data you should be tracking from day one at your company:

1. Dates

The date you grant a stock certificate or option informs many aspects of its lifecycle. It determines the vesting schedule, the taxes a holder must pay when selling and many other critical details. In addition to tracking the grant date, it’s important that the date of exercise and date the stock certificate is awarded are the same. You should also track the date of terminations as that is used to determine your employee’s Post-Termination Exercise window.

You won’t believe the number of companies we have seen that have allowed former employees to buy their stock options, even thought it was after their PTE window had closed, just because this wasn’t being tracked.

2. Transactions

Early investors and early employees will have multiple option and stock grants. It is critical to track which option is being exercised to create which certificate. You will need to match certificate ID numbers, dates and entity names. You also need to note if these certificates were issued on paper or electronically. This will make recording these events in a cap table software much simpler later on.

3. Convertible Notes

As an early stage company, you probably raised your first tranche of money using convertible notes. Many view convertible notes as debt and tracked them as such, in a forgotten in a folder until a conversion triggering event.  In reality, they should be viewed as equity and tracked in the cap table.

4.  Percentage of ownership, not simply number of shares.

Stock certificates only track the number of shares given to each party. To gain real insight from your cap table you and your investors need to know the percentage ownership.  Make sure your cap table clearly shows the percent ownership for each stakeholder to avoid inadvertently diluting anyone.

If you want a powerful Excel cap table template to use prior to switching onto a software platform, check out the eShares template here.

 

 

 

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