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A capital plan
is a forecast of future financing rounds and the respective impact on ownership for
each shareholder. A Capital Table ("Cap Table") communicates the exact
ownership at a given point in time by class of stock. Investors will want this information
before they will consider investing in your company. It is also important to you
so that you understand the impact of future financing on your ownership.
You can download Excel spreadsheets
for an example of a Capital Plan and a Cap Table here.
HOW IT WORKS
Most technology companies
are structured as "C" Corporations with two classes of stock: common and
preferred. Founders and employees will typically be issued common stock and options
while investors will receive one or more series of preferred stock (i.e. Series A,
Series B, etc.).
Preferred stock is entitled to
a preference on dividends and liquidation.
DO:
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