Issues You’re Likely to Run into with Cap Table Management

by | Sep 24, 2018 | Financial Services

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Cap table management helps companies determine valuations, equity dilution, ownership stakes, and more. It’s usually complicated, and most company owners struggle immensely, especially if they’re just starting out.

In simple terms, the capitalization table is a ledger that helps you keep track of stock options and who owns what and how much. However, tracking can get complicated, especially when you add in things like convertible and traditional debt, derivatives holders, warrant holders, and more. In just one round of financing, your ledger can get out of hand quickly. Learning about the issues you’re likely to face can help you prepare for and prevent them.

No Centralized System

Many people are going to have to access that cap table, such as the accounting department, invested parties, and any central leadership departments. Sometimes, lawyers and outside parties are going to need access. Therefore, you need a centralized system so that any party can gain access as necessary. As such, you can make it harder to update or communicate with party members. Make sure that the software you choose is cloud-based or on an online platform.

Tracking Inconsistencies

The system you choose is only as reliable as the updates and tracking you provide. Because other people are likely to see the information, it can get confusing if you add new columns/lines or keep rearranging the information. Therefore, when you get your cap table management software, it’s best to make sure all the information is correct and the way you want it before allowing others access. That way, everything is already set up to be correct, and no one gets confused.

Document Changes

When you make changes to the system’s appearance or make updates for the next round of funding, make sure to document those changes effectively. Visit Colonial Stock Transfer Company, Inc. for more information.

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