A cap table is essentially the company’s ownership ledger, tracking every class of stock, every option grant, and every investor stake, and how they all add up. Understanding where you sit on it, and where you don’t yet sit, helps explain both what your equity actually represents today and how it could be diluted over time. This post covers what a cap table tracks, how the different pieces relate, and what your specific position looks like at different stages.
What is a cap table?
A cap table is a detailed record of a company’s ownership structure: every shareholder (founders, investors, and employees who’ve exercised options), every class of stock (common and the various series of preferred), and every outstanding option or other convertible security, along with the price paid and the percentage of the company each one represents. Companies maintain and update it continuously, especially around funding rounds, new hires, and departures.
Where do I appear on the cap table before I exercise my options?
You typically don’t appear as an individual shareholder yet. Unexercised options are usually tracked in aggregate as part of the company’s “option pool,” a reserved block of shares set aside for equity compensation, rather than listed under your name specifically. Once you exercise and actually own shares, you’d appear as a common stockholder in your own right.
What’s the difference between common and preferred stock on a cap table?
Common stock is what employees and founders typically hold, and it carries the fewest special rights. Preferred stock is what investors receive in funding rounds, and it comes with additional protections, most notably a liquidation preference, which generally means preferred holders get paid out before common holders in an acquisition or wind-down, up to a specified amount. This is part of why your strike price (based on common stock value) is typically lower than what investors paid per share for preferred stock in the same period.
What is the option pool, and why does it matter?
The option pool is the block of shares a company sets aside specifically for granting employee equity, and it’s typically established or expanded around funding rounds. A larger option pool generally means the company has more room to grant new equity to future hires, but it also means more total shares outstanding, which affects everyone’s percentage ownership through dilution.
How does dilution show up on a cap table?
Every time a company issues new shares, whether to new investors, new employees, or through an expanded option pool, existing shareholders’ percentage of the total company shrinks proportionally, even though the number of shares they personally hold doesn’t change. This is normal and expected as a company raises money and grows, but it means your percentage ownership at grant is very unlikely to be your percentage ownership years later, even if you never sell a single share.
Worked example
Say a company has 10,000,000 total fully diluted shares, and you hold options for 40,000 shares, representing 0.4% of the company at that moment. The company then raises a new round, issuing 2,000,000 new preferred shares to investors and expanding the option pool by 1,000,000 shares for future hires.
Total shares outstanding rise to 13,000,000. Your 40,000 shares (still 40,000, unchanged) now represent roughly 0.31% of the company instead of 0.4%, purely due to dilution from the new shares, even though nothing happened to your specific grant.
FAQ
Do I get to see the company’s full cap table? Not usually in detail. Private companies generally keep full cap tables confidential, though you’re typically entitled to information about your own specific grant and sometimes your approximate ownership percentage.
Does dilution mean my shares are worth less? Not necessarily. Dilution reduces your percentage of the company, but if the company’s total value grows enough, the dollar value of your smaller percentage can still increase.
Why is preferred stock worth more than common stock for the same company? Because preferred stock carries additional rights, most importantly a liquidation preference that pays those holders first in an exit, which common stockholders (including option holders) don’t have.
Do all employees get added to the cap table individually? Only once they exercise options and hold actual shares. Before that, unexercised options are generally tracked as part of the aggregate option pool.
How often does the cap table change? Continuously in an active startup, especially around funding rounds, new hires, departures, and any exercises or sales of stock.
What to do next
Your specific ownership percentage and how it’s likely to change with future funding rounds depend on your company’s actual cap table, not general examples like the one here. You can model your own numbers at movewealth.io.
MoveWealth is not a broker-dealer, investment adviser, or lender. This is educational content, not financial, tax, or legal advice. Consult a qualified professional about your specific situation.