How to read a startup cap table
A capitalization table — cap table — lists every owner of a company’s equity and how much each holds. Reading one tells you what you are really buying, and what you are not.
What a cap table shows
Ownership by class
Founders and employees typically hold common stock; investors hold preferred stock with extra rights (liquidation preference, pro-rata, sometimes board seats). The cap table separates these classes because they are not economically equal.
Fully diluted vs. issued
"Issued" shares are what exists today; "fully diluted" adds every option, warrant and convertible instrument (SAFEs, notes) as if converted. Your real ownership percentage is calculated on the fully diluted number — always ask for that view.
The option pool
Shares reserved for future employee hires, usually 10–20% of the fully diluted cap table. A pool created or expanded right before your round dilutes everyone except the new investor — a common negotiation point.
A simplified example
Illustrative only — every real cap table looks different.
| Holder | Shares | % fully diluted |
|---|---|---|
| Founders | 6,000,000 | 60.0% |
| Option pool | 1,500,000 | 15.0% |
| Seed investors (prior) | 1,500,000 | 15.0% |
| Your SAFE (converts this round) | 1,000,000 | 10.0% |
What to check before you sign
Outstanding SAFEs and notes
Every prior SAFE and convertible note dilutes everyone once it converts. A company that has raised several uncapped or high-cap SAFEs can surprise later investors with far more dilution than expected.
Founder vesting status
Confirm founders are still on a standard vesting schedule. Fully-vested founders with no ongoing lock-up have less incentive to stay if things get hard.
Clean cap table, no disputes
Ask directly whether any current or former shareholder disputes their stake. Messy cap tables (verbal equity promises, unresolved co-founder splits) are a common source of deals falling apart post-close.