Share-cap tables key concepts

1. 2. Key Concepts

2. 2
Key Concepts – Share Classes
• Key variables:
- Voting rights
- Liquidation preference
- Price
- Right to dividends
Points to note
- It is possible to create a new class of shares and attach any specific
rights or privileges to it
- The actual legal rights of share classes are given in the Articles of
Association
- Options normally convert into the lowest class of shares – CHECK THIS
- In the Airbnb example, the new investors could have invested into a new
class of B Shares with the founders holding A Shares
Total A
Shares
Total B
Shares
Total
Shares
Issued % Fully
Diluted %
Founders
Brian Chesky 1,000 - 1,000 25.00% 25.00%
Joe Gebbia 1,000 - 1,000 25.00% 25.00%
Nathan Blecharczyk 1,000 - 1,000 25.00% 25.00%
Founder Subtotal 3,000 - 3,000 75.00% 75.00%
Investors
Angel 1 0 500 500 12.50% 12.50%
Angel 2 0 350 350 8.75% 8.75%
Angel 3 0 150 150 3.75% 3.75%
Investors Subtotal 0 1,000 1,000 25.00% 25.00%
Options - -
Option Pool-Existing - - 0.00%
Option Pool - New - - 0.00%
Options Subtotal - - - 0.00%
Total 3,000 1,000 4,000 100% 100%
Post investment

3. 3
Key Concepts - Options
• Options are a way of awarding shares to non-investors
• People are given the “option” to buy a share at a given price under given circumstances
• The most common use of options is for employees e.g. Employee Management Incentive
(EMI)
• The intention is to align the interests of the staff and investors e.g a big exit for the
business is good for everyone
Key terminology:
• Strike price – price you have to pay for each share to exercise the option. Normally lower
than market price for a share. See it as a discounted price for staff.
• Unallocated – a specific number of options have been created but not given to anyone
• Allocated – a specific number of options have been created and have been ear-marked
for specific people
• Vested – even if you are entitled to buy options at a strike price you may have to wait
until you can “exercise” this right. This normally incentivises staff to remain in their job
and see the options as a long-term incentive. Vested shares are where the option holder
is able to exercise them
• Granted – Once the shares have vested, and the strike price is paid, they are granted

4. 4
Key Concepts - Options
• The new investors into Airbnb want to create an option pool for new
hires
• They decide this should be 400 shares
• This is the equivalent of 9.09% of Airbnb Inc. (= 400 / 4,400)
• These shares are created but held back (ie unallocated options)
A Ords Issued basis
%
Fully
Diluted %
New Money
Invested
New B Ord
Shares
New
Options - A
Ords
Total A
Ords
Total B
Ords
Total
Shares
Issued % Fully
Diluted %
Founders
Brian Chesky 1,000 33.33% 33.33% 1,000 - 1,000 25.00% 22.50%
Joe Gebbia 1,000 33.33% 33.33% 1,000 - 1,000 25.00% 22.50%
Nathan Blecharczyk 1,000 33.33% 33.33% 1,000 - 1,000 25.00% 22.50%
Founder Subtotal 3,000 100.00% 100.00% 3,000 - 3,000 75.00% 67.51%
Investors
Angel 1 0 0.00% 0.00% 500,000£ 500.00 0 500 500 12.50% 11.25%
Angel 2 0 0.00% 0.00% 350,000£ 350.00 0 350 350 8.75% 7.88%
Angel 3 0 0.00% 0.00% 150,000£ 150.00 0 150 150 3.75% 3.38%
Investors Subtotal 0 0.00% 0.00% 1,000,000£ 1,000.00 0 1,000 1,000 25.00% 22.50%
Options - -
Option Pool-Existing 0 0.00% - - 0.00%
Option Pool - New 0 0.00% 444 444 444 9.99%
Options Subtotal 0 0.00% -£ 444 - 444 9.99%
Total 3,000 100% 100% 1,000,000£ 1,000.00 3,444 1,000 4,444 100% 100%
Post investment (with options)New Investment

5. 5
Impact of Options
• With the additional option
pool the total number of
shares post-investment
increase
• This reduces the total
ownership stake of all
shareholders
• E.g Angel 1 owns 12.5%
of Airbnb with no option
pool or 11.25% when a
9.99% additional option
pool is created
Total A
Ords
Total B
Ords
Total
Shares
Issued % Fully
Diluted %
Total A
Shares
Total B
Shares
Total
Shares
Issued % Fully
Diluted %
Founders
Brian Chesky 1,000 - 1,000 25.00% 22.50% 1,000 - 1,000 25.00% 25.00%
Joe Gebbia 1,000 - 1,000 25.00% 22.50% 1,000 - 1,000 25.00% 25.00%
Nathan Blecharczyk 1,000 - 1,000 25.00% 22.50% 1,000 - 1,000 25.00% 25.00%
Founder Subtotal 3,000 - 3,000 75.00% 67.51% 3,000 - 3,000 75.00% 75.00%
Investors
Angel 1 0 500 500 12.50% 11.25% 0 500 500 12.50% 12.50%
Angel 2 0 350 350 8.75% 7.88% 0 350 350 8.75% 8.75%
Angel 3 0 150 150 3.75% 3.38% 0 150 150 3.75% 3.75%
Investors Subtotal 0 1,000 1,000 25.00% 22.50% 0 1,000 1,000 25.00% 25.00%
Options - - - -
Option Pool-Existing - - 0.00% - - 0.00%
Option Pool - New 444 444 9.99% - - 0.00%
Options Subtotal 444 - 444 9.99% - - - 0.00%
Total 3,444 1,000 4,444 100% 100% 3,000 1,000 4,000 100% 100%
Post investment (no options)Post investment (with options)

6. 6
Key Concepts – Issued vs Fully Diluted
• Total ISSUED SHARES does not include any options and warrants
• Total FULLY DILUTED shares does include options and warrants
• Post investment an option pool is created – this only affects the Fully Diluted %. The
Issued % is not affected by options
• Pre-investment there was no option pool so Issued % was equal to Fully diluted %
• Fully diluted % reflects the minimum % ownership a shareholder will experience
A Ords Issued basis
%
Fully
Diluted %
Total A
Ords
Total B
Ords
Total
Shares
Issued % Fully
Diluted %
Founders
Brian Chesky 1,000 33.33% 33.33% 1,000 - 1,000 25.00% 22.50%
Joe Gebbia 1,000 33.33% 33.33% 1,000 - 1,000 25.00% 22.50%
Nathan Blecharczyk 1,000 33.33% 33.33% 1,000 - 1,000 25.00% 22.50%
Founder Subtotal 3,000 100.00% 100.00% 3,000 - 3,000 75.00% 67.51%
Investors
Angel 1 0 0.00% 0.00% 0 500 500 12.50% 11.25%
Angel 2 0 0.00% 0.00% 0 350 350 8.75% 7.88%
Angel 3 0 0.00% 0.00% 0 150 150 3.75% 3.38%
Investors Subtotal 0 0.00% 0.00% 0 1,000 1,000 25.00% 22.50%
Options - -
Option Pool-Existing 0 0.00% - - 0.00%
Option Pool - New 0 0.00% 444 444 9.99%
Options Subtotal 0 0.00% 444 - 444 9.99%
Total 3,000 100% 100% 3,444 1,000 4,444 100% 100%
Pre investment Post investment (with options)

7. 7
Key Concepts - Dilution
• Dilution = Total New Shares / Post investment shares
• If an option pool is created this is included within the Total New Shares
• New Shares = 1,000 (invested) + 444 (options)
• Post-investment shares = 4,444
• Dilution (with option pool) = 1,444 / 4,444 = 32%
• Dilution (no option pool) = 25%
A Ords Issued basis
%
Fully
Diluted %
Total A
Ords
Total B
Ords
Total
Shares
Issued % Fully
Diluted %
Founders
Brian Chesky 1,000 33.33% 33.33% 1,000 - 1,000 25.00% 22.50%
Joe Gebbia 1,000 33.33% 33.33% 1,000 - 1,000 25.00% 22.50%
Nathan Blecharczyk 1,000 33.33% 33.33% 1,000 - 1,000 25.00% 22.50%
Founder Subtotal 3,000 100.00% 100.00% 3,000 - 3,000 75.00% 67.51%
Investors
Angel 1 0 0.00% 0.00% 0 500 500 12.50% 11.25%
Angel 2 0 0.00% 0.00% 0 350 350 8.75% 7.88%
Angel 3 0 0.00% 0.00% 0 150 150 3.75% 3.38%
Investors Subtotal 0 0.00% 0.00% 0 1,000 1,000 25.00% 22.50%
Options - -
Option Pool-Existing 0 0.00% - - 0.00%
Option Pool - New 0 0.00% 444 444 9.99%
Options Subtotal 0 0.00% 444 - 444 9.99%
Total 3,000 100% 100% 3,444 1,000 4,444 100% 100%
Pre investment Post investment (with options)