Your Cap Table Matters More Than You Think

When building a SaaS, the cap table can look like a side detail — something your lawyer or accountant handles.

Instead, a well-planned cap table will avoid costly surprises later — especially as you raise capital and grow your team.

1. Cap Table = Ownership + Control

Every share represents two things: ownership and influence. As your company raises capital, each new investor takes a percentage of both.

That’s normal — dilution happens — but unmanaged dilution can erode founder ownership faster than you expect.

For example, if you start with 100% and raise three rounds where each new investor takes 20% post-money, your original stake can drop below 50% by Series B.

Modeling dilution ahead of each round gives you clarity on what ownership you’ll have after you hit key milestones.

It’s the difference between being surprised by the math or using it to your advantage.

2. The ESOP & Dilution Math

One of the most common founder frustrations happens around the Employee Stock Option Pool (ESOP).

Say an investor wants 20% post-money, and you plan for a 10% ESOP post-money. To make that work, you need to create a larger pool of 12.5% ESOP before the investment closes.

That’s because the investor’s new shares also dilute the option pool, so you have to set it slightly higher upfront to end up with 10% later.

If you skip this step, the ESOP is effectively funded by founder shares, not shared across all shareholders as intended.

A modeling check like this prevents future tension and protects your team and investors alike.

3. Think Two Rounds Ahead

Your current round sets the tone for the next ones.

A practical exercise:

• Estimate how many rounds you’ll raise before break-even or exit.

• Assume 15–20% dilution per round (typical for early-stage SaaS).

• Work backward to see your likely ownership at each stage.

For example, a founder starting with 85% who raises two rounds at 20% dilution each will end up around 54% ownership.

Still majority — but only just. That context helps you negotiate from a position of awareness, not reaction.

4. Your Cap Table Tells a Story

Investors don’t just look at your numbers; they read your cap table like a timeline of decisions.

Clean, simple structures suggest discipline and avoid questions.

A healthy cap table shows:

• A balanced split among founders.

• A reasonable ESOP (10–15%).

• Limited early angel overhang.

• Clear vesting schedules and no unallocated “mystery” shares.

These details might not feel urgent now, but they directly affect your valuation and investor confidence later.

5. Quick Cap Table Health Check

Here’s a simple list to keep things in order:

• One updated spreadsheet showing all shareholders, fully diluted.

• A 3-year forward model of dilution (including ESOP refresh).

• Ownership breakdown per round, pre- and post-money.

• Scenario analysis: “If we raise $2M at $10M pre, what happens to founder ownership?”

• Exit view: ownership × projected valuation = potential founder proceeds.

Even small startups will need this. It’s not about having the perfect forecast — it’s about having clarity.

A cap table isn’t paperwork; it’s strategy in numbers.

Handled well, it helps you raise capital on fair terms and keep your team motivated. Handled poorly, it quietly limits your options before you notice.

Take the time to understand it now. The effort pays off — often quite literally.