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
February 26, 2020 — Equa, which helps organizations manage their agreements while empowering better ownership decisions, is now listed in the Polymath Service Provider Marketplace. In the marketplace, security token issuers can connect with various service providers, such as cap table management providers, broker-dealers, law firms, KYC providers, and more for their security token offerings.
Equa is an all-in-one integrated technology platform focused on streamlining systems, agreements, and ownership rights. From seed to fruition, they help businesses grow by minimizing the chaos and headaches of being an entrepreneur and a business owner. The Equa solution includes digitized, trackable workflows with automated signing, approvals and group voting tech, easy execution of ownership rights, and a certified immutable record keeping system.
“My mission is to relieve the pain and anxiety associated with the difficulties of running a business that can result in lost capital and peace of mind.” said Shawn A. Owen, Founder & CEO of Equa, Inc.
“The ongoing management of a security token is an integral piece of the puzzle for both issuers and investors” said Graeme Moore, Head of Tokenization at Polymath. “Now, security token issuers using Polymath’s tokenization technology can leverage Equa for corporate actions, cap table management, transfer agent services, and more.”
About Polymath (polymath.network)
Polymath Network (Polymath) is a decentralized platform that makes it easy to create and manage security tokens. The platform simplifies the complex challenges of creating security tokens and aims to provide the technology to bring the multi-trillion dollar financial securities market to the blockchain.
About Equa (https://www.equa.global)
Equa is a technology company focused on adding value through bringing peace of mind to its users. Our mission is to build technology that improves how people come to agreements and document their most valued records.