When a cap table is integrated into a business, it allows the business to list all of the securities associated with the company, such as warrants, stocks, equity, and options, and who the owners are. While every business uses a cap table, companies who are starting out should use them often for cap table tracking. Besides this, there are other reasons to use it, such as the four listed below.
1. To Have a Better Understanding of Equity
When there is more than one founder of a company, the distributions need to be agreed upon. When cap tables have used the structure of ownership gets outlined as well as the amount of allocation towards each founder. By having this in a cap table, there will be no more conflicts concerning the amount each owns.
2. To Trigger Fundraising
As part of fundraising, you can expect investors to receive a certain percentage in exchange for funding. So it is important to know what will be given before you raise funds. An investor will need to know the details about the ownership and if any changes have been made.
Cap tables can also keep a company structure organized by tracking structure changes. A good example is seeing how shareholders will be affected by fundraising.
3. Managing Stock Options
Making stock options available helps to keep incentives in line with company goals. This can be accomplished by providing options to employees as a form of compensation. The option can then be bought or sold prior to a specific date.
When you are in need of cap table management, you can trust that EquityTrack will manage your cap tables, and keep them updated. To find out more, get in touch at https://www.equitytrack.co/.
