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Template Cap Table and
Returns Analysis Guide
by Alexander Jarvis
Want to learn more?
GET FULL, IN-
DEPTH ADVICE
FROM A PRO
Chat with us at 50folds
- Fundraising
- Startup Consulting
- Ven...
Follow and connect with me
• @ADJBlog
• https://angel.co/alexander-jarvis
• sg.linkedin.com/in/alexanderdjarvis/
• This is a guide to using a template cap table (with
returns analysis) that I created
• The cap table enables founders to...
• You can download the spreadsheet from my blog
here:
http://wp.me/p41jkx-3d
Download
• It is an excel spreadsheet that sets out in a ledger
who owns the startup at different periods of time
• It is a list of...
• Think of it this way, when you start out as a founder
you own 100% of the company, right? Well you raise
a Seed round an...
• The cap table enables you to understand the ownership of your
company and how it evolves across multiple financing round...
• As you are no doubt aware, things can get pretty
complicated and therefore my model does not account for
every scenario
...
• Your cap table is important. I did this myself and it
has not been audited by anyone
• You ultimately will need a lawyer...
Founder Table
• Founders and staff get both/or:
• Common stock
• Common options
• Common stock is ‘junior’ to preference shares
which is...
Founder table
This is the split of the company when you start
Put in name of founders and staff
Put in the shares people start out
with
...
New options
This is where you add new options for staff
When you issue shares over time
they are deducted from the
unvested options po...
Angel Round
• Your angel round will either be:
• Priced round - ‘Angel cap table’ tab
• Convertible debt - ‘Angel Convertible’ tab
• I...
Angel round tabs:
Angel Convertible
Angel Convertible tab
Here you issue convertible notes which convert at Seed
Put in the numbers you negotiate,
simple
This is something you agre...
Where the angel converts in the seed stage
This shows you total amount of cash
you actually got
Thats the convertible valu...
See the conversion of shares in the Seed tab
And here the angel convertible fits
into the summary cap table in the
Seed tab
Angel round tabs:
Angel Cap Table
Angel cap table summary section
Put in assumptions and see the results
Here the investor wants a bigger
ESOP plan
This is a option pool for staff
If is al...
Calculations of Angel round
The right section is what just happened after the angel
investment
This shows you the cap table from
previous round
note t...
Now everyone is getting diluted as we add more shares
There are 2 investors
one takes 80% of the shares from
that round
Af...
Seed Round
• Having raised the angel round, the next one is
Seed
• The seed round is priced- you agree on a pre-
money valuation and ...
Seed round assumptions
Put in the terms for the new round, note the Convertible note!
No ESOP
This is the value Angel convertible
investors get
T...
Seed cap table
This is the ownership of your startup post Seed investment now
Seed investors now have a ‘fully
diluted’ 24.9%
Preference ...
Series A Cap Table
• Things have gone well and you are now closing
your Series-A
• Pre-money has been agreed at $5m, with $1.3m
investment
• ...
Series-A Assumptions
Nothing you havent seen before
Lots new shares in ESOP
Series A investors take 21%
Seed investors diluted to 19%
Here is t...
Series-A cap table
Unissued ESOP is now 725k shares (5%) and we have two Series A
investors on the board
Series A investors take 20.6%
Unissu...
Series B Cap Table
• Its a year later
• Pre-money is up to $12m, with $5m investment
• The investors want to make the ESOP bigger so
you can ...
Series B assumptions
We issue 1m to the ESOP
Lots new shares in ESOP
Issue new options and expand ESOP
The unissued ESOP nets out
Unissued ESOP now 525k shares
We issued 1.2m options to
Employee #4 and the rest of the
staff
U...
Series B cap table
The cap table is getting big now!
New investors
More dilution
Series C Cap Table
• You raise your Series-C round which is a growth
investment to scale your business before your exit
• This is the last ro...
Series C Assumptions
Series C cap table
Returns Waterfall
• After multiple rounds of finance, hard work and
some luck, it is time to make money at exit!
• The “Returns Waterfall” w...
• Investors asked you to increase the ESOP so you
could issue shares to new staff as you need to
attract new talent
• Inve...
Assumptions
There are only a few variables for you to have to play with
This is summary of your final cap
table
This allows you to adj...
Summary of investor returns by exit value
The more you sell for the more common get
Common get nothing as liquidation
preferences claim all the return
Series-C liqu...
% of returns taken by shareholders
Here we can see how much of the money goes to what investor
Series-C get all of it
Common shareholders (Founders
and staff...
Valuation range
This is the range of exit values
The range
This is your base exit value
This is the increments (+/-) to the
central exit v...
Series-C preference calculation
This tells you if Series-C take their preference payment or if they
convert to common shares and take a %
They aren’t conv...
Series B
Series B are next in the waterfall
Preference payment Here they convert to common
No dividend being paid
B, A and Seed get calculated in the same manner
Preference payment summary
At the end of the waterfall you see preference paid and
remaining proceeds for common shareholders
Preferences paid
Amount...
Common share returns summary
After adjusting for preference share payments you can see how
much common shareholders get paid
Common get nothing
% of wh...
Total proceeds to all investors
We see here the actual amount each shareholder gets
This shows common plus preference
payments as a % of total proceeds
Th...
Print sheets
• These sheets are simply a summary you can print
out of the cap tables
Summary
Series-A
Series-B
Series-C
Enjoy!
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Template cap table and returns analysis guide

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This is a guide to how to use my template cap table and returns analysis excel spreadsheet.
This will enable founders to track the ownership of their startup from founding up to Series-C as well as what returns will be generated upon exit (Across different valuations).
The template is available for download on my Blog. The link is in the attached presentation.

Template cap table and returns analysis guide

  1. 1. Template Cap Table and Returns Analysis Guide by Alexander Jarvis
  2. 2. Want to learn more? GET FULL, IN- DEPTH ADVICE FROM A PRO Chat with us at 50folds - Fundraising - Startup Consulting - Venture Building
  3. 3. Follow and connect with me • @ADJBlog • https://angel.co/alexander-jarvis • sg.linkedin.com/in/alexanderdjarvis/
  4. 4. • This is a guide to using a template cap table (with returns analysis) that I created • The cap table enables founders to track ownership from founding up to Series-C • In addition there is a nifty ‘Returns Waterfall’ tab that enables you to calculate returns to all the shareholders at an exit • This presentation is going to explain at a high level how to use it • This stuff is complicated so you are going to have to do reading to really get your head around it Introduction
  5. 5. • You can download the spreadsheet from my blog here: http://wp.me/p41jkx-3d Download
  6. 6. • It is an excel spreadsheet that sets out in a ledger who owns the startup at different periods of time • It is a list of the shareholders and how much each person owns • It tells you how much money you will make if you exit, which is what I am sure you want to know! What is a cap table?
  7. 7. • Think of it this way, when you start out as a founder you own 100% of the company, right? Well you raise a Seed round and now investors have a chunk. How do you know who owns what? The cap table tells you • Furthermore, by having one properly set out you can truly understand what you own in different scenarios and after all sorts of complex things happen such as effects of liquidation preferences, discounts on convertible debt, the option pool shuffle and more importantly, not confuse ‘basic’ stuff like your ownership being based on post-money valuations and not pre-money Why do you need a cap table?
  8. 8. • The cap table enables you to understand the ownership of your company and how it evolves across multiple financing rounds, as well as play with all the assumptions to support how you structure your next financing round • The template accounts for most for what you will typically see with investors. It covers you for: • Initial founder table • Angel investment (Both as convertible debt which converts at Seed stage and straight priced round) • Seed investment (Assuming 1x strategy preferred liquidation preference) • Series A, B and C (Again structured as the Seed investment) • In addition to the cap table, I have integrated a waterfall returns analysis so you can calculate exactly how much people will earn and at different exit valuation scenarios. I have not seen someone do this before, so I think it is pretty cool What my template cap table does
  9. 9. • As you are no doubt aware, things can get pretty complicated and therefore my model does not account for every scenario • Assuming you are dealing with reputable investors, you won’t ever really have to change this (Such as account for multiple liquidation preferences and participating preferred shares) • I do not assume that you will: • Get funded with warrants • Assume there is a vesting schedule on shares (Though there is a switch to remove unissued shares from the ESOP pool) • Have debt and interest that converts to shares • Have multiple liquidation preferences • Participating preferred shares • Different terms for investors at each stage of funding What my template cap table does not do
  10. 10. • Your cap table is important. I did this myself and it has not been audited by anyone • You ultimately will need a lawyer to ratify it • I do not take any responsibility whatsoever with what you do with it Important Disclaimer!
  11. 11. Founder Table
  12. 12. • Founders and staff get both/or: • Common stock • Common options • Common stock is ‘junior’ to preference shares which is what your investors get (Certainly in series-A and after) • Preference shares are legally a separate ‘class’ • Often they come with special rights, normally either control or economic in nature • This means you get paid after everyone who has preference ones Shares
  13. 13. Founder table
  14. 14. This is the split of the company when you start Put in name of founders and staff Put in the shares people start out with New shares get dealt with later This tells you how much everyone owns…
  15. 15. New options
  16. 16. This is where you add new options for staff When you issue shares over time they are deducted from the unvested options pool in the future tabs Summary tab of what happens across future financing rounds
  17. 17. Angel Round
  18. 18. • Your angel round will either be: • Priced round - ‘Angel cap table’ tab • Convertible debt - ‘Angel Convertible’ tab • I have made two sheets to deal with these • The priced round is the same as all the other sheets except angels are getting common shares • The convertible debt gets converted to Preference shares at the discount you negotiate to the Seed Round (Aka the ‘Next qualified financing’) • Why? Well it’s all about negotiation. Assume angels in a priced round don’t get preference, but in a convertible they want to convert at the same class as the Seed investors Angel round tabs
  19. 19. Angel round tabs: Angel Convertible
  20. 20. Angel Convertible tab
  21. 21. Here you issue convertible notes which convert at Seed Put in the numbers you negotiate, simple This is something you agree on approximately, and let’s you know how much is owed till you raise again This changes automatically when you start putting in numbers into the Seed round tab It will say “215” if the Seed table is blank
  22. 22. Where the angel converts in the seed stage This shows you total amount of cash you actually got Thats the convertible value it converts into It’s higher than the $50k investment due to interest and being netted up from the discount
  23. 23. See the conversion of shares in the Seed tab And here the angel convertible fits into the summary cap table in the Seed tab
  24. 24. Angel round tabs: Angel Cap Table
  25. 25. Angel cap table summary section
  26. 26. Put in assumptions and see the results Here the investor wants a bigger ESOP plan This is a option pool for staff If is also a way to decrease the effective valuation This is the date you close the round Premoney + investment = postmoney Put in how much each investor invests and their name Summary cap table before investment Summary cap table AFTER investment
  27. 27. Calculations of Angel round
  28. 28. The right section is what just happened after the angel investment This shows you the cap table from previous round note this is 25000 more than before We increased the ESOP in the round by 75000 but in the founder sheet we issued 50000 shares to Founder #1. This nets to a 25000 increase Here is the issuance
  29. 29. Now everyone is getting diluted as we add more shares There are 2 investors one takes 80% of the shares from that round After we issue new shares everyone gets diluted
  30. 30. Seed Round
  31. 31. • Having raised the angel round, the next one is Seed • The seed round is priced- you agree on a pre- money valuation and investment amount • The Seed investors get issued a new class of shares call preference shares • Give them ‘economic’ right of a 1x liquidation preference. Meaning they get their investment back before common shareholders do if they use the right (Optional, they will convert to common if they can make more money) • This is a straight preferred not participating preferred (Investors don’t ‘double dip’ which is bad for founders) Seed round
  32. 32. Seed round assumptions
  33. 33. Put in the terms for the new round, note the Convertible note! No ESOP This is the value Angel convertible investors get This is the actual cash that was got Angel investors now own 15% Seed investors got 25%
  34. 34. Seed cap table
  35. 35. This is the ownership of your startup post Seed investment now Seed investors now have a ‘fully diluted’ 24.9% Preference not common shares have been issues Fully diluted adds both common and preference We can see a summary of ownership by category
  36. 36. Series A Cap Table
  37. 37. • Things have gone well and you are now closing your Series-A • Pre-money has been agreed at $5m, with $1.3m investment • If you divide the pre-money valuation over the total number of shares post Seed you get the share price that Series A investors are buying at • The number of shares in total post series-a shares have been issued times by the share price tell you the post money valuation Series A
  38. 38. Series-A Assumptions
  39. 39. Nothing you havent seen before Lots new shares in ESOP Series A investors take 21% Seed investors diluted to 19% Here is the share price i mentioned
  40. 40. Series-A cap table
  41. 41. Unissued ESOP is now 725k shares (5%) and we have two Series A investors on the board Series A investors take 20.6% Unissued ESOP bigger 5% ESOP
  42. 42. Series B Cap Table
  43. 43. • Its a year later • Pre-money is up to $12m, with $5m investment • The investors want to make the ESOP bigger so you can issue more shares to staff • The Series-B investors are senior to the Series-A ones Series B
  44. 44. Series B assumptions
  45. 45. We issue 1m to the ESOP Lots new shares in ESOP
  46. 46. Issue new options and expand ESOP
  47. 47. The unissued ESOP nets out Unissued ESOP now 525k shares We issued 1.2m options to Employee #4 and the rest of the staff Unissued ESOP now 525k shares
  48. 48. Series B cap table
  49. 49. The cap table is getting big now! New investors More dilution
  50. 50. Series C Cap Table
  51. 51. • You raise your Series-C round which is a growth investment to scale your business before your exit • This is the last round of financing you are going to do (In this model anyway) • Post this you will be looking at exit opportunities and using the next tab, “Returns Waterfall” to calculate the returns on investment Series-C
  52. 52. Series C Assumptions
  53. 53. Series C cap table
  54. 54. Returns Waterfall
  55. 55. • After multiple rounds of finance, hard work and some luck, it is time to make money at exit! • The “Returns Waterfall” will tell you how much money each investor will make for different valuations • The latest investor typically gets their money back first, so the sheet is a reverse waterfall • You start with the Exit value • Each investor decides if they use their liquidation preference or not and the money flows down to the common shareholders Introduction
  56. 56. • Investors asked you to increase the ESOP so you could issue shares to new staff as you need to attract new talent • Investors ask this BEFORE they put in money, so previous investors are the only ones getting diluted • It also reduced the effective valuation they paid as they don’t expect all the shares to be issued to new staff • In most cases the entire ESOP will NOT be issued meaning that the returns are equally divided across all shareholders • Previous investors paid to make the ESOP pool • The model allows you to remove or leave it in • Expect to remove it Including the unissued ESOP?
  57. 57. Assumptions
  58. 58. There are only a few variables for you to have to play with This is summary of your final cap table This allows you to adjust for unissued options and drives all the calculations below This is the ESOP switch FALSE: remove unissued ESOP TRUE: include whole ESOP The exit date drives dividend payments (If investors negotiated them) Dividend % is input here Series-C get a dividend of 10% This tells you if the shares are included or not
  59. 59. Summary of investor returns by exit value
  60. 60. The more you sell for the more common get Common get nothing as liquidation preferences claim all the return Series-C liquidation preference is taken up to here The exit value range (Right is more cash!)
  61. 61. % of returns taken by shareholders
  62. 62. Here we can see how much of the money goes to what investor Series-C get all of it Common shareholders (Founders and staff) get paid! Past a certain point, returns are constant to all shareholders in proportion to ownership
  63. 63. Valuation range
  64. 64. This is the range of exit values The range This is your base exit value This is the increments (+/-) to the central exit value
  65. 65. Series-C preference calculation
  66. 66. This tells you if Series-C take their preference payment or if they convert to common shares and take a % They aren’t converting to common shares till an exit of $64m so they take their preference Convert to common tells you if they convert Returns for different exit values Series-C get a dividend payment of 10% so the total preference is more than $9m We put the 10% dividend in the assumptions remember?
  67. 67. Series B
  68. 68. Series B are next in the waterfall Preference payment Here they convert to common No dividend being paid
  69. 69. B, A and Seed get calculated in the same manner
  70. 70. Preference payment summary
  71. 71. At the end of the waterfall you see preference paid and remaining proceeds for common shareholders Preferences paid Amount for common shares to get return
  72. 72. Common share returns summary
  73. 73. After adjusting for preference share payments you can see how much common shareholders get paid Common get nothing % of what is left getting paid to the shareholders The number of shares ‘what is left’ is divided to common shares Preferences are not taken, investors convert to common $ payment to common shareholders
  74. 74. Total proceeds to all investors
  75. 75. We see here the actual amount each shareholder gets This shows common plus preference payments as a % of total proceeds This is the dollar value payment to investors Ths is the per share return to investors This shows the multiple of their investment they make Seed investors get a 5.6x return on investment 1x return is the liquidation preference at work
  76. 76. Print sheets
  77. 77. • These sheets are simply a summary you can print out of the cap tables Summary
  78. 78. Series-A
  79. 79. Series-B
  80. 80. Series-C
  81. 81. Enjoy!

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