Imagine a nerdy, bean counter-ish accountant nestled in dark corner wrestling with a spreadsheet. For some, this is what comes to mind when they think of the term “Cap Table.”

With the advancements taking place in the nascent world of technology a reframe of this mindset is emerging, one that promises to revolutionize the world of business capital and investments.

Cap Tables or “capitalization tables,” are a spreadsheet or digital table that highlights a company’s ownership percentages, level and value of equity for founders, investors, and other owners involved in investment rounds.

The purpose of this record-keeping system is to provide a snapshot of all of the shareholders and security holders of a business. This tally is designed to ensure that the share count of a business or enterprise is equal to the total number of shares held by investors and other security holders such as management team members, founders, paid advisors, and rank-in-file staff.

Typically employed by startups and early-stage private companies, Cap Tables ideally will include a record of all equity ownership capital, including common and preferred equity shares and pricing, convertible equity, and warrants. A more in-depth table might integrate elements such as new funding sources, public offerings, mergers and acquisitions, and other sorts of enterprise related transactions.

Because companies are in a constant state of evolution and flux, traditional ways of ensuring that cap tables are continuously updated can be quite involved, particularly if it involves a large scale, rapidly growing business. The issuance of new securities, option pool increases, or the granting of options to employees is among the myriad events that can trigger a change to a capitalization table. Same with a termination event such as when employees exit a business or an investor redeems, transfers, or sells shares.

Harnessing “Cap Tables” As A Decision-making Tool”

There are countless decisions made over the life of a business that impact capitalization. By way of example, if new financing is being sought, a series of scenarios may be needed to assess key factors such as valuations. Or the recruitment of a new Chief Operating Officer where a candidate might request to review key information and metrics on the strategic position of the company. Bottom line, an accurate and up-to-date cap table appraisal allow good business decisions to be made thoughtfully and rapidly.

Here’s another key consideration: If your company is venture backed, you are likely under the auspices of “protective provisions” which require various approvals prior to taking certain actions.

By way of example, let’s say that your business is seeking new financing. Your charter probably requires that separate consents be obtained from a majority of Series A, B, and C shares.

In this scenario, your cap table should reflect the percentage of Series A and B shares (together) held by each individual holder as well as the Series C share percentage held by each holder. This will allow you to quickly gather the necessary consents for your new financing.

A Jump “START” To Cap Table Management

At Equa our aim is to provide a simplified solution to capitalization tables, one that reduces the time, labor and friction around a stock transfer. Here, the computation and retention can be done using technology (versus by an error-prone human) resulting in a faster, cheaper and more accurate outcome.

We are also rapidly progressing toward providing our clients with new technology solutions that allow ownership transfers to take place in minutes at little or no cost. This signals a vast improvement over time and costs attributed to current best practices.

Currently, with the transfer of ownership, two signatures are required by the parties selling the equity, a process that can drag on for month amid busy schedules. With this new solution, digital signatures will be able to be captured allowing for the process and even settlement times to be accelerated.

Finally, Equa's solution promises to mitigate a great deal of the record-keeping labor costs associated with transferring equity. With the prospect of record-keeping being done on-chain, there is no cost attributed to humans.

In the end, cap tables through instant, online issuance and transfer of company stock without transfer fees signify a groundbreaking innovation for today’s rapidly emerging “ownership economy.” This move to instant records of ownership tied to work efforts and communications signifies Equa's leading role in blazing a new future for business record-keeping and document management.

To learn more about Equa and sign up for a free trial, please visit us at www.equa.global

This interview was recorded during this year’s Anarchapulco conference on The Crypto Show (thecryptoshow.com)

In the Interview, Shawn discusses the following topics.

· Consensual Agreements

· Smart Contracts

· Operating Agreements

· Business Management UX

· Cap Tables

Also featured in an earlier segment of this interview was a conversation with Ashe Oro. Ashe has been a long-time proponent of blockchain and entrepreneurship. If you would like to learn more about what he’s working on please go to https://soundcloud.com/heryptohow/ashe-oro-and-shawn-owens-at-anarchapulco.

To learn more about Equa and sign up for a free trial, please visit us at www.equa.global

Starting a business is an exciting endeavor. The possibilities for success are unlimited.

But the road to success is not easy. It requires long hours, dogged persistence, and the expenditure of funds.

With the takeoff of your entrepreneurial venture, you may have noticed the impact it’s having on your time and finances. This requires your constant attention in order to ensure that these vital resources are not depleted.

Developing a business plan without an effective cap table or other financial tools often lead to unfortunate business failures. Without a mechanism for accurately tracking historical financials, it becomes a challenge to accurately assess new company revenue and costs.

The good news is that while these critical obligations may be a challenge, they are certainly manageable with the right systems in place.

Here at Equa, we provide a broad range of solutions for managing the time and financial demands of your business. Targeting the simplification of business agreements, our platform allows members to create a new business, obtain a bank account, and secure a tax ID within minutes. This allows business owners to significantly reduce the amount of time and money involved in establishing and managing a company.

Starting a business can be a time and money vacuum. Given the explosive growth of small businesses and registered entities worldwide, Equa is on a trajectory to becoming the pre-eminent one-stop global destination for documents, banking, and compliance.

Says founder and CEO Shawn Owen“We are excited to offer an enterprise cloud solution that allows businesses to draft, sign and manage all of their operational agreements. We also provide tools for managing an organization’s capitalization table and ownership structure.”

He concludes: “Ultimately, the real magic is in the ability to manage ongoing edits or evolution's needed for any action or transaction from your dashboard at the click of your fingertips. We aim to make corporate governance and high finance easy and fun while providing business leaders with an efficient system for managing their time and financial demands.”

To learn more about Equa and sign up for a free trial, please visit us at www.equa.global

A “Cap Table” (short for “Capitalization Table) is a document, typically in the form of a spreadsheet or table, that offers a snapshot of a company’s equity capitalization and total market value.

While commonly used by startups and early-stage businesses, cap tables have utility for all types of companies. In the case of a new startup, the founders are typically the only ones represented on the cap table. This is because they’re the sole equity holders. But as a company matures, the volume of cap table entries expand pursuant to growth in the number of investors as well as company ownership changes.

These documents aim to capture shareholder equity and other sorts of information including common equity shares, preferred equity shares, warrants, and convertible equity. With this, cap tables become a vital decision-making tool for assessing equity ownership, market capitalization, and market value.

Given the financial significance of this information and the fact that companies are constantly evolving, it is paramount for a cap table to be accurate, tailored, and kept current and up-to-date.

One of the common pitfalls with cap tables is that a manually updated Excel spreadsheet can morph into more than one version.

By way of example, the company chief financial officer might manage one copy while outside legal council holds another version. So if a staff member exercises their option and the company forgets to provide an update of this to the lawyer (or vice versa), the two records become inconsistent. It’s here where the reconciliation of these records can become time-consuming and costly

There are many factors and emerging trends that impact capitalization. Therefore accurate and up-to-date cap table provides are paramount for fostering strategic direction and business growth.

To learn more about Equa and sign up for a free trial, please visit us at www.equa.global

Maintaining a clean, paper trail of securities transactions is a prevailing issue for many companies. At the nexus of this is SEC Rule 144, which stipulates that certain conditions must be met in order for the sale of securities to take place.

The effective tracking of securities is vital for private companies seeking to enter the public marketplace. Steering clear of knotty compliance issues and delays pursuant to any SEC due diligence reviews is paramount.

A key qualifier for the Rule 144 exemption is meeting the holding period for each security issued prior to resale. Pursuant to the Securities Exchange Act of 1934, an issuing company that’s also a reporting company has a qualifying holding period of six months. For those companies that are not in a reporting capacity, the qualifying holding period is one year.

This holding period commences on the original issuance date of the security, irrespective of resale or conversion. Many private companies, however, fail to track and account for this on their capitalization tables. This can be problematic if an audit is ever conducted.

To learn more about Equa and sign up for a free trial, please visit us at www.equa.global

What Is an Option Pool?

An option pool consists of shares of stock reserved for employees of a private company. The option pool is a way of attracting talented employees to a startup company - if the employees help the company do well enough to go public, they will be compensated with stock. Employees who get into the startup early will usually receive a greater percentage of the option pool than employees who arrive later.

The initial size of the option pool may decrease with subsequent rounds of funding because of investors' ownership demands. The creation of an option pool will commonly dilute the founders' share in the company because investors (angels and venture capitalists) often insist on it.

KEY TAKEAWAYS

How Option Pools Are Structured

The shares that comprise an option pool typically are drawn from investor stock in the company rather than the shares earmarked for investors. This may be 15%–25% of the overall outstanding shares and may be determined when the startup receives its earliest funding round as part of the overall terms put in place.

It is also possible that a company, over the course of its development and subsequent funding rounds, may establish additional option pools after the initial one is put in place. The size of the pool may be dictated or advised by the venture backers to be a portion of the pre-money or post-money valuation of the company. Negotiations over the scope of the option pool can affect the startup’s overall price. For example, investors may want an option pool offered post-money option to be priced at the pre-money valuation, which could lower the price for the company.

Other Considerations

The shares disbursed from the option pool may be determined by the roles of the employees as well as when they are hired. For example, senior management that is brought on board near the founding of the startup may receive a percentage of the entire pool, whereas later employees in more junior roles might be granted just fractions of a percent.

The option pool grants shares that, like other types of stock options, often require a period of time before they are vested. This means the employee will not be able to benefit from these shares possibly for several years. By delaying their ability to reap monetary value from their portion of the option pool, the belief is that the employee will contribute more to the overall health and growth of the company in order to see the greatest possible gains when the shares vest.

Data rooms are cloud applications that facilitate the secure storage and sharing of confidential information, including business documents. These virtual constellations are now the norm and are rapidly replacing the need for actual physical documentation.

Properly administered, these systems represent an additional layer of security for business documents. They can also reduce friction when it comes to the movement of documents contributing to the speed and execution of a transaction.

Essentially, a data room acts as a hub for all sorts of engagements that require a robust and secure environment for storage, management, and sharing of business information. These systems then become globally accessible through an internet connection.

Companies facing various forms of due diligence and asset management requests find data room solutions of immense value. They are particularly useful in the facilitation of collaborations and working relationships between business stakeholders.

Traditionally employed in the financial world, data room use cases have experienced a major growth trajectory over the past decade. Mergers and acquisitions and joint venture investments are two realms where virtual data has grown in popularity. Operating agreements, patents, and compliance records are other areas where these digital systems are seeing growing adoption.

In the future, data room solutions will increasingly make use of artificial intelligence and machine learning technology to boost such features as automatic document translations and query management. Other features that are making an advancement include notation systems, advanced permissions, and multi-factor authentication.

Then there’s the emergence of Blockchain that promises to upend the world of traditional archiving, with secure data rooms validated with the timestamping phase of a transaction.

Below is a list of common questions and answers about the Equa data room and why Equa represents such a promising new normal for businesses and enterprises.

How are documents transferred into the Equa data room?

The client success team will work with you every step of the way to ensure an easy and secure upload of your files to the Equa data room. Through this manual process, we collect everything our clients need to set up a corporate data room successfully. We conduct a thorough gap analysis of your documents before migrating them into our system.

As we begin to digitize the individual and unique clauses of operating documents, vendor documents, employment documents, cap tables, — anything tied to governance and compliance activities within your organization, we will turn all of those documents into digital forms that will be updatable and changeable as you progress through your business cycles. Our aim is to ensure a smooth and safe transmittal of this information.

Who manages a data room, Equa or the client?

The aim is for both Equa and you, the client, to have full administrative control over the contents of a data room. What that means is, while Equa could produce documents that could land in your data room, you as a client will also have your own documents that you’ll want to upload and manage.

What makes the Equa data room so valuable?

Keeping track of myriad business documents is an immense, time-consuming hassle for most organizations. A compliance review can be an absolute nightmare as well, unless you’re fortunate enough to have a really good lawyer who’s exquisitely well organized with files and can retrieve them on a moments notice. The value of a data room is in this retrievability, along with the accessibility and authoritativeness of having the most recent, up to date independently verifiable source of a document.

How easily can we retrieve documents?

With Equa, not only are your documents retrievable on a moment’s notice, but you also have the ability to amend them very quickly. And it’s very cost-effective compared to other options.

How do we engage with the Equa platform once our documents have been downloaded?

Our intuitive dashboard comes with simple and easy-to-understand workflows to ensure a world-class user experience. This, in turn, helps to boost the overall efficiency of your document storage and retrieval processes.

What if we want to make changes to a document?

The ability to make changes or amendments to any governing document is essential to ensuring the most up to date, accurate repository. Equa provides a seamless platform for ensuring a single source of truth for all your documents.

How does this update and access process actually occur?

Once uploaded, we’ll produce the original documents which will allow those designated to digitally signed these documents. We will also create hashed versions of these for the blockchain with those links of information stored within our system so you can see the who and when of any amendments to the document.

Who controls access to these documents?

Once you make changes to, say, a Capitalization Table or other operational document, we’re going to back that up on a blockchain, creating a public record that’s independently verifiable by each individual who had access to the original document via a private key. Here at Equa, we’ll help you manage and control access to those documents, along with providing auditable records of all of who accessed them and when they were accessed.

And who can be given access?

That’s for you to determine. It could include two corporate administrators, a president and a vice-president, the corporate lawyer or employees who have been issued stocks in an organization. Each person is going to have different levels of access to the data room, or different data rooms specific to their needs. Those different levels of access will provide them with different pieces of information that are appropriate for their levels of exposure.

Is there a particular protocol that ensures this access?

Essentially what we’re talking about here is data storage with private key encryption and basic log in protection which allows each person access at the appropriate levels. Audit trails are then going to tag along as people with the right credentials are able to access certain documents.

What about our paper documents?

Paper versions do ultimately get filed with some jurisdictional or government agency. The good news is that digital options to file those paper versions have been developed. Those are the types of partnerships we’re looking to build through Equa over time.

What is the ultimate value proposition that Equa delivers?

For both you as a business and your community of stakeholders, your cost and productivity value exponentially increase in terms of greater efficiencies around agreements. Decisions can be made more quickly with the rapid processing and dissemination of information. It’s like rocket fuel for businesses that want to move more quickly while staying compliant.

Delivering proactive, highly personalized service is a hallmark of Equa’s value proposition to clients. In this brief Q&A, we asked customer success team members, Kyle Croyle, and Andrea Stevens, to discuss their approach to delivering exceptional service during the client onboarding stage and beyond.

What does a typical day look like for the two of you?

Kyle: While Cap Tables are a key element of what we do for clients, there are so many other areas where we can deliver value. This isn’t the type of stuff that’s taught in any school. So for our clients, a lot of it is just learning on the fly.

Andrea: We offer companies a foundation that allows them to effectively engage with their startup employees. Unfortunately, a lot of these businesses miss out on this opportunity to reinforce what they’re building.

Kyle: Agreed. The system we offer provides a great way for our client companies to build loyalty within their organization through transparency. It’s all about exposing everyone to those numbers.

What sort of problems are business owners facing these days?

Andrea: Business owners are inundated with emails and people sending them different documents. And then to make matters worse, these documents are often printed and placed in a paper file.

Maybe in a year, they’ll need to pull together an investor recap. Or maybe there’s an investor that comes on board who wants to see the Cap Table. All of a sudden the business owner has to pour through their email or other document files to try to locate all of this information.

So how exactly does Equa begin simplifying things for founders and business owners?

Andrea: They often want support in streamlining their process. We never again want them to wonder if the Cap Table they pulled off their drive is updated. Then there’s the information necessary for compliance. Some of it could be at their attorney’s office, some could be in a file drawer. Or they could have no clue as to where it is. So there are all of these nuances that onboarding at Equa is going to make so much easier for the business owner.

Kyle: Most startups do not have CFO’s. And if they do it’s a part-time CFO, maybe even an advisor. But as the founder of a company, you wouldn’t want to spend hours dealing with compliance and investor documentation, cap tables, things like that. So there is simplistic value in what we offer because that workload is being migrated over to Equa. This allows owners to focus on the important business at hand.

And how can Equa help the business owner save on costs?

Kyle: If you are a startup you may have a law or CPA firm representing you and drafting things like corporate formation documents and other stuff. But because they’re so expensive, you’ll try your best not have to turn to them for anything but the most important matters.

So what do you say to those startups who are confronted with this yet are inclined to cut a corner or two to save on expenses?

Kyle: Yes, there are companies where the mentality is essentially if we mess up or don’t complete something, we’ll ask for forgiveness later. There’s this blind hope that the SEC, FINRA or other regulatory body is not going to care. But let’s be real — the ultimate goal of any startup business is to grow and be profitable as soon as possible. But it’s equally important for these businesses, however, to recognize that everything they’re doing, running up to that hyper-growth scenario, will be uncovered, scrutinized and audited eventually. That’s where the big risk lies.

Kyle, you’ve had your own personal experiences in running a business and dealing with compliance. What was that like?

Kyle: Yes. As a founder of a company, I was scared shitless about managing everything to do with document compliance, particularly those involving investors because I’m not a lawyer. So off-loading all of this on someone like Equa would have offered some peace of mind in addition to taking a ton of actual workload off my plate.

Andrea, anything to add to this?

Andrea: A lot of entrepreneurs are of the thinking, “I’ll build this business and then I’ll sell it”. Great! But if they’ve never done an M&A, they have no clue as to the kind of due diligence they have to go through. In fact, they often do things that make them less desirable when the day comes for an acquisition. So, it begs the question of why even start a company if you’re going to fall into that trap.

Kyle: To piggyback on that, while taking a frugal approach at the early stages of a business is understandable, a company may be opening themselves up to problems down the line. They could end up paying for it financially later on by spending 10X in fees to remedy all of the things that were left incomplete.

What’s the message you’re trying to convey here for businesses?

Andrea: That while it’s hard to have the foresight to address these things early on, I believe it’s imperative for their survival and ultimate success. That’s why the pricing model we offer here at Equa is so attractive, well within a startup’s budget even if they’ve raised a little bit of money. It’s helpful in terms of saving dollars while preventing what could be costly compliance issues. We’re here to help them get that foundation right.

Kyle: You are so right, Andrea. This should be viewed as a long-term versus short term proposition for businesses. Unfortunately, many companies are trying to manage finances in a way that has a short-term effect. Eventually, they could end up paying thousands more than they would than if they’re working with us here at Equa.

So what’s the first step for a business that wants to get started with Equa?

Andrea: Currently we’re asking new clients that we are on-boarding for some core documents like bylaws, operating documents, shareholder documents, member documents, and a cap table if they have these. At that point, we’ll take those uploaded documents, review them and make sure that they’re all in place and signed. Once all of this has occurred, we’ll have a discovery (check-in) call with the client to ensure that they understand what they’re seeing before moving onto the next step.

Next steps?

Andrea: Well, thismight involve developing a Cap Table for them. Or assisting them with any due diligence needed around the documents they should have in place at any stage of their business.

Kyle: The goal for the customer success team is to ensure that we’re delivering as seamless of a process as possible in terms of the on-boarding. We’ll require a number of upfront documents, as Andrea mentioned, but then we work hand in hand with the client in getting that information into our tech-enabled environment here at Equa. Once all of the data is in there, there are a lot of possibilities on what can be done with it.

Any final thoughts?

Kyle: Andrea and I believe that customer success should be inherently proactive. Thus it is important for us to develop a solid understanding of your uniqueness as a client. Our emphasis is getting to know all of our clients on a deep level through our discovery and gap analysis process. Through our team skillset, we’ll be able to help a business not just set up a Cap Table but also assist in directing them to additional resources that can help the business become more profitable and feel greater peace of mind.